FISCAL RELIEF AND THE CHALLENGES OF CORPORATE HIGH-QUALITY DEVELOPMENT: EVIDENCE FROM CHINESE ENTERPRISES
DOI:
https://doi.org/10.35631/AIJBES.829049Keywords:
Corporate High-Quality Development, Enterprise Capacity Development, Fiscal Policy, Innovation Capability, Tax and Fee ReductionsAbstract
Tax and fee reductions are a fundamental policy tool to promote the growth of corporations, but little research is done on how the internal processes of converting fiscal incentives into high-quality development of firms work systematically. The bulk of the current scholarship is based on quantitative models to confirm the economic effects of tax relief, which are not able to fully understand how businesses perceive policy dividends, redistribute released capital and overcome organisational limitations in practice. The paper determines the realistic barriers and viable optimisation avenues to transforming the benefits of tax and fee reductions into a sustainable business competitiveness. This study is qualitative in nature using semi-structured interviews, which are based on the supply-side economics, financing constraint theory and endogenous growth theory. The data were gathered from enterprise owners, senior executives, finance managers and tax experts to sum up the actual experiences of enterprises in the operation of preferential fiscal policies. Interview results reveal five major restraining factors limiting policy effectiveness: insufficient policy accessibility, cumbersome administrative procedures, short-term liquidity pressures, weak independent innovation capacity, and mismatches between policy design and corporate development demands. This paper further confirms that tax relief can only drive high-quality growth if firms possess adequate capacity to divert saved funds into innovation, technological upgrading, human resource training and organisational optimisation. Different from prior outcome-focused quantitative research, this study shifts analytical focus to the organisational operation logic behind fiscal policy implementation, enriching theoretical explanations of tax incentives at the micro-firm level. The conclusions provide targeted references for policymakers to optimise policy publicity, build complementary supporting mechanisms and design differentiated fiscal tools matching heterogeneous enterprise characteristics.
Downloads
References
Aghion, P., & Howitt, P. (1992). A model of growth through creative destruction. Econometrica, 60(2), 323–351. https://doi.org/10.2307/2951599
Hall, R. E., & Jorgenson, D. W. (1967). Tax policy and investment behavior. The American Economic Review, 57(3), 391–414.
He, L., Jiang, X., & Fang, L. (2023). Tax policy reform and corporate innovation in China. Finance Research Letters, 55, 103891. https://doi.org/10.1016/j.frl.2023.103891
Huang, S. J., Xiao, H. J., & Wang, X. (2018). On the high-quality development of state-owned enterprises. China Industrial Economy, (10), 19–41.
Jiang, X. H., & Wang, S. J. (2015). A study of the effects of preferential tax policy on corporate R&D investment. Science Research Management, 36(6), 46–52.
Jorgenson, D. W. (1963). Capital theory and investment behavior. The American Economic Review, 53(2), 247–259.
Lan, F., Wang, W., & Cao, Q. (2020). Tax cuts and enterprises’ R&D intensity: Evidence from a natural experiment in China. Economic Modelling, 89, 304–314. https://doi.org/10.1016/j.econmod.2019.10.031
Li, J. Q., & Zhao, X. L. (2021). Accelerated depreciation policy of fixed assets and capital-labor ratio of enterprises. Financial and Trade Economics, 42(4), 67–82.
Liu, Y., & Mao, J. (2019). How do tax incentives affect investment and productivity? Firm-level evidence from China. American Economic Journal: Economic Policy, 11(3), 261–291. https://doi.org/10.1257/pol.20170478
Ministry of Finance of the People’s Republic of China. (2024). Report on the implementation of China’s fiscal policy in 2023. https://www.mof.gov.cn/zhengwuxinxi/caizhengxinwen/202403/t20240307_3930117.htm
Ren, S., & Lyu, Z. (2014). Financing constraints, government subsidies, and total factor productivity: An empirical study from Chinese equipment manufacturing enterprises. Management World, (11), 10–23.
Romer, P. M. (1990). Endogenous technological change. Journal of Political Economy, 98(5, Part 2), S71–S102. https://doi.org/10.1086/261725
Shen, G., Chen, B., & Yang, R. (2016). Can tax reduction boost China’s economy? An empirical study based on China’s value-added tax reform. Economic Research Journal, 51(11), 70–82.
Solow, R. M. (1957). Technical change and the aggregate production function. The Review of Economics and Statistics, 39(3), 312–320. https://doi.org/10.2307/1926047
Syverson, C. (2011). What determines productivity? Journal of Economic Literature, 49(2), 326–365. https://doi.org/10.1257/jel.49.2.326
Tang, J., & Feng, J. (2019). The impact of social insurance contributions on the capital-labor ratio of enterprises: Taking the change of provincial pension insurance collection institutions in the early 21st century as an example. Economic Research Journal, 54(11), 87–101.
Wang, J., Liu, C., Xie, Z., & Shen, G. (2024). Tax incentives and corporate innovation: Evidence from China’s value-added tax reform. Contemporary Economic Policy, 42(1), 183–202. https://doi.org/10.1111/coep.12631
Wang, J., Shen, G., & Tang, D. (2021). Does tax deduction relax financing constraints? Evidence from China’s value-added tax reform. China Economic Review, 67, 101619. https://doi.org/10.1016/j.chieco.2021.101619
Wang, Z. J., & Wang, H. (2022). Low-carbon city pilot policy and high-quality development of enterprises: Test based on the two-dimensional perspective of economic efficiency and social benefits. Economic Management, 44(6), 43–62. https://doi.org/10.19616/j.cnki.bmj.2022.06.003
Yang, Z. (2023). How does the digital economy drive the high-quality development of enterprises? Core mechanism, mode selection and promotion path. Journal of Shanghai University of Finance and Economics, 25(3), 92–107.
Ye, K. T. (2022). Accounting and high-quality development of enterprises. Friends of Accounting, (7), 12–16.
Yu, J., & Qi, Y. (2022). BT-to-VAT reform and firm productivity: Evidence from a quasi-experiment in China. China Economic Review, 71, 101740. https://doi.org/10.1016/j.chieco.2021.101740
Zhang, L., Chen, Y., & He, Z. (2018). The effect of investment tax incentives: Evidence from China’s value-added tax reform. International Tax and Public Finance, 25(4), 913–945. https://doi.org/10.1007/s10797-017-9475-y
Zhao, J., & Wang, J. (2022). Social insurance contributions and firm investment: A quasi-experimental evidence from China. The Singapore Economic Review, 67(2), 895–916. https://doi.org/10.1142/S0217590822500072
