Zhao Ying and Lu Yuanping, researchers from the Center for International Cooperation and Disciplinary Innovation of Income Distribution and Public Finance (111 Center), published an essay "Scale-Biased Tax Incentives and Job Creation" in The Journal of World Economy in Issue 8, 2025.
Abstract
Existing research has mainly focused on the strong ability of small-scale market entities to create jobs. However, the impact of tax incentives on this requires further study. This study will discuss this issue in the background of establishing a value-added tax (VAT) threshold policy, with matching the national business registration data from 2013 to 2015 with taxpayer identity records. The findings reveal that such fiscal policy enhances the ability of small-scale taxpayers to create jobs, which is more significant in new first-tier cities. This job creation ability mainly comes from new market entities, while the contribution of existing entities is limited. Small-scale taxpayers have the advantage of reducing fiscal cost with tax cuts, and the cost of job creation is especially lower than with other incentives. Improving the VAT threshold policy will better support small-scale market entities to develop and enhance social welfare.
Keywords: VAT threshold, small-scale taxpayers, job creation
About the Authors
Zhao Ying, professor and doctoral supervisor of the School of Public Finance and Taxation, Zhongnan University of Economics and Law (ZUEL), as well as a researcher of the Center for International Cooperation and Disciplinary Innovation of Income Distribution and Public Finance. Research interest includes public sector economics and development economics. He was the Candidate of the Hubei Provincial Key Talent Project, the Xiangjiang Scholar Program, the Hubei Province Postdoctoral Talent Continued-Cultivation Program, and the Young Scholar of the "Wenlan Scholar Program." He has published papers as the sole or first author in journals such as Economic Research Journal (3 articles), Journal of Management World, China Industrial Economics, Journal of Financial Research, and China & World Economy. He has presided over 10 projects, including 2 General Programs and 1 Young Scientists Fund project of the National Natural Science Foundation of China, as well as projects of the Humanities and Social Sciences Research Program of the Ministry of Education. He has won the first prize of the Hubei Province Outstanding Research Award and the 16th Wuhan Social Science Achievement Award. He is an anonymous reviewer for Economic Research Journal, Journal of Management World, China Economic Quarterly, China Industrial Economics, Journal of Financial Research, China Economic Review, and China & World Economy. He also serves as a correspondence review expert for the projects of the National Natural Science Foundation of China, as well as a review expert for the Ministry of Science and Technology and the State Administration of Foreign Experts Affairs.
Lu Yuanping, Wenlan Distinguished Professor, Doctoral Supervisor, Director of the Academic Affairs Office, Executive Director of the Center for International Cooperation and Disciplinary Innovation of Income Distribution and Public Finance at Zhongnan University of Economics and Law. He was selected as a young top-notch talent in the National Talent Program and in Hubei Province. He serves as a member of ZUEL's academic committee, executive director of the China Association of Labor Economics and the Hubei Population Association, and an expert in the Social Security Talent Pool of the Ministry of Finance. His research fields include income distribution, social security, fiscal taxation policy, happiness economics, etc. He has presided over 20 national, provincial, and ministerial projects, including major projects of the National Social Science Fund of China, general programs and young scientists fund projects of the National Natural Science Foundation of China, projects supported by the Humanities and Social Sciences Fund of the Ministry of Education, and the ministry-provincial cooperation projects of the Ministry of Finance. His research results have been published in journals such as Economic Research Journal, Journal of Management World, China Economic Quarterly, Journal of Financial Research, Chinese Rural Economy, Finance & Trade Economics, Economic Perspectives, Cities, Journal of Happiness Studies, China & World Economy and The Social Science Journal. He is an anonymous reviewer for journals such as Economic Research Journal, Journal of Management World, China Economic Quarterly, China Industrial Economics, Journal of Financial Research, Finance & Trade Economics, Journal of Happiness Studies, and China Economic Review, and a communication review expert of the National Natural Science Foundation of China.
About The Journal of World Economy
The Journal of World Economy is an academic journal supervised by the Chinese Academy of Social Sciences, co-organized by the China Society of World Economics and the Institute of World Economics and Politics, CASS. Founded in 1978, it is one of the earliest publications on the world economy in China. In 2014, it was rated as an authoritative journal in economics in the evaluation report of the Journal of Humanities and Social Sciences in China.