The research paper Taxpayer Identity Selection and Employment Opportunities: Evidence from the Matched Data of Chinese Firms and Taxation by researchers Zhao Ying, Lu Yuanping and Yang Guochao from IIDPF was published in the 9th issue 2023 of Economic Research Journal, the top journal.
Abstract
Tax administration is an important foundation for improving tax collection and management efficiency as well as stabilizing national governance capabilities. The continuous improvement of tax collection and management capabilities requires not only steady changes in taxation, but also lasting improvement in management. Among them, the professional management system for taxpayers is an important institutional arrangement for tax administration. The development of small-scale market entities often faces a dilemma: small-scale market entities are an important force in absorbing social employment, while the tax burden of small-scale taxpayers in some industries is actually higher. Although China implements classified management of value-added tax entities, the original intention of the system is that the tax burden of small-scale taxpayers is lower than that of general taxpayers. How enterprises can influence their own development and social welfare by choosing taxpayer identity has not received sufficient attention yet. In fact, the small-scale market entities absorb a large number of jobs, but the fiscal costs brought by tax cuts are far lower than other types such as fixed assets investment.This paper focuses on how the behaviors and decision-making of general taxpayers will change in the reform of the taxpayer identity management system implemented in May 2018 in China, and its impacts on social employment, to supplement the existing research. Specifically, in the context of the government's policy of allowing general taxpayers to re-register as small-scale taxpayers for the first time in 2018, we use the matched samples of national firm data, tax data, recruitment data, and credit data from 2017 to 2018 to analyze the impact of the implementation of this re-registration system on enterprise development.The findings are as follows.(1) This policy has had significant impacts on employment opportunities, with a reduction of 1.38% in jobs at the firm level. In regions and industries where general taxpayers are concentrated, the negative impacts are greater. This phenomenon is more common in first-tier cities and in such industries as wholesale and retail. The impact of the difficulty in obtaining employment, as well as the possibility of individual changes in the group caused by the re-registration of general taxpayers as small-scale taxpayers, has been excluded, and the external validity of the conclusion has been further verified.(2) The inherent mechanism lies in the difference in tax burden between the two identities of taxpayers, which leads to an increase in the number of value-added tax general taxpayers re-registering as small-scale taxpayers.(3) We find that the impact of the reform on employment is not limited to the short term, as evidenced by a lack of significant improvement in employment trends in the months following the reform, based on an analysis of enterprise recruitment data over several years. We further analyze the use of capital factors by enterprises while reducing labor factors, and find that there is no increasing trend of investment and financing behaviors among enterprises. The policy has had an unexpected positive impact on the credit environment of enterprises, particularly in terms of a significant reduction in tax dishonesty. This outcome highlights the effectiveness of the policy, which contributes to enhancing the overall social credit environment. In this sense, allowing the change of tax identities exerts pressures on social employment, which differs significantly from the impact of tax and fee reductions on labor demand under a given taxpayer identity system. This phenomenon has not been identified in previous research on tax and fee reductions.The above findings suggest that how the change of taxpayer identity affects changes in their own tax burden should become a concern for tax and fee reductions. Market entities actively adapt to policy changes and change their taxpayer identities to obtain tax incentives, which is significantly different from the model of passively enjoying tax incentives while waiting for the government to introduce policies. At the same time, implementing this registration system not only provides enterprises with the option to choose their taxpayer identities, but also has a negative impact on employment, which necessitates the introduction of supporting measures to promote the sharing of tax reduction benefits among different entities.
Brief Bio
Zhao Ying is an associate professor, master's tutor and associate blogger at the School of Public Finance and Taxation, and a researcher of IIDPF under the Ministry of Education and the Ministry of Science and Technology. Her research interests are public sector economics and development economics, and she has been selected as one of the important talents project of Hubei Province, Xiangjiang Scholar, Hubei Postdoctoral Excellent Talent Tracking and Cultivation Programme, and Wenlan Young Scholar. She has published papers as independent or first author in China & World Economy, Economic Research Journal (3 articles), China Industrial Economics and Journal of Financial Research. She has presided over a total of more than 10 projects, including three national natural sciences and humanities and social sciences projects of the Ministry of Education. She was awarded the first prize of Hubei Provincial Excellent Research Achievement Award and the first prize of Wuhan 16th Social Science Achievement Award. She is an anonymous reviewer for China Economic Review, China & World Economy, Economic Research Journal, China Economics Quarterly, China Industrial Economics and Journal of Financial Research. Economic Research Journal, China Economics Quarterly, China Industrial Economics and Journal of Financial Research. She also serves as a Corresponding Reviewer for the National Natural Science Foundation of China, and a Reviewer for the Ministry of Science and Technology and the State Administration of Foreign Trade.
Lu Yuanping is a professor at the School of Public Finance and Taxation, a PhD supervisor, Deputy Director of the Research Department, a Wenlan Young Scholar, and a selected member of the Hubei Provincial Important Talent Project. Professor Lu is also the Executive Director of the IIDPF of Income Distribution and Public Finance under the Ministry of Education and the Ministry of Science and Technology. His research areas include income distribution and common prosperity, social security and fiscal policy, intergenerational mobility, and happiness economics. He has presided over more than 20 national and provincial projects, including the General Project of the National Natural Science Foundation of China (NSFC), the Youth Project of the NSFC, the Humanities and Social Sciences Fund of the Ministry of Education, and the Ministry of Finance's Provincial and Provincial Joint Construction Project. He has published more than 40 papers in SSCI/CSSCI, and his research results have appeared in Economic Research Journal, China Economic Quarterly, Journal of Financial Research, Finance & Trade Economics, Economic Perspectives, Journal of Happiness Studies, China & World Economy and The Social Science Journal.
Yang Guochao is a Professor and PhD Supervisor of the School of Accounting, Director of IIDPF's Big Data Centre, Director of the Research Centre for New System Accounting, Internationalized High-end Accounting Talent of the Ministry of Finance, Hubei Provincial Young Top Talent, a PWC Young Scholar, PhD of the Department of Finance of the School of Management of Fudan University, and a Certified Public Accountant (CPA) of both Canada and China. He is a Certified Public Accountant in Canada and China. His main research interests include analyses of institutional and non-institutional factors in stock market, bond market and public policy. His papers have been published in Economic Research Journal (5), Management World, China Economic Quarterly (4), The Journal of World Economy (3), Journal of Management Sciences in China, China Industrial Economy (3), and China Industrial Economy (3). Sciences in China, China Industrial Economics, Journal of Financial Research, Accounting Research (5 articles), China Economic Quarterly International, Journal of Financial Research, Accounting Research (5 articles), China Economic Quarterly International, China Journal of Accounting Studies (4 articles) and other authoritative academic journals at home and abroad. He has won the Hong Yinxing Economics Award (Youth), the Best Paper Award of PwC3535 Forum, the Best Paper Award of China Financial Research Conference (CFRC), the First Prize of Outstanding Achievements in Social Sciences of Hubei Province, the National Excellent Teaching Cases of MPAcc, the first batch of high-quality online courses in Hubei Province, and the Ping An Education Fund of China's high-quality course awards. Award, etc. He has presided over the key projects of the National Social Science Foundation of China, the youth projects of the National Natural Science Foundation of China, the youth projects of the Humanities and Social Science Foundation of the Ministry of Education, as well as a number of commissioned projects of Hubei Province and enterprises.
About Economic Research Journal
Economic Research Journal, founded in 1955, is a comprehensive economic theory journal, founded by the Institute of Economics of the Chinese Academy of Social Sciences (CASS) and supervised by the Chinese Academy of Social Sciences (CASS). It is recognised as China's most internationally influential academic journal (humanities and social sciences) and China's top journal in the field of economics.