How Distortive are Turnover Taxes? Evidence from Replacing Turnover Tax with VAT / Jing Xing, Katarzyna A. Bilicka, Xipei Hou.

By:

Xing, Jing

Contributor(s):

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w29650.Publication details: Cambridge, Mass. National Bureau of Economic Research 2022.Description: 1 online resource: illustrations (black and white)Subject(s):

Online resources:

Available additional physical forms:

Hardcopy version available to institutional subscribers

Abstract: In this paper, we investigate distortions created by turnover taxes. As a natural experiment, we explore a reform that replaced turnover taxes with value-added taxes for some service industries in China, while the taxation of manufacturing industries remained unchanged. The reform increased sales, R&D investment, and employment for affected service firms, which is primarily driven by outsourcing from downstream manufacturing firms. We document that smaller and less innovative manufacturing firms outsource more, and reallocation increases the quality of innovation for affected service firms. Our study provides new evidence on the negative impact of turnover taxes imposed on business inputs.

Tags from this library: No tags from this library for this title. Log in to add tags.

Average rating: 0.0 (0 votes)

Holdings
Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w29650 (Browse shelf(Opens below))	Not For Loan

Total holds: 0

Collection: Colección NBER Close shelf browser (Hides shelf browser)

Previous	No cover image available	No cover image available	No cover image available	No cover image available	No cover image available	No cover image available	No cover image available	Next
Previous	nber w29648 Household Spending Responses to the Economic Impact Payments of 2020: Evidence from the Consumer Expenditure Survey /	nber w29649 A Cross-Country Comparison of Old Age Financial Readiness in Asian Countries vs. the United States: The Case of Japan and the Republic of Korea /	nber w2965 Trade Liberalization in General Equilibrium: Intertemporal and Inter-Industry Effects /	nber w29650 How Distortive are Turnover Taxes? Evidence from Replacing Turnover Tax with VAT /	nber w29651 Inclusive Monetary Policy: How Tight Labor Markets Facilitate Broad-Based Employment Growth /	nber w29652 What Leads to Measurement Errors? Evidence from Reports of Program Participation in Three Surveys /	nber w29653 Planning for the “Expected Unexpected”: Work and Retirement in the U.S. After the COVID-19 Pandemic Shock /	Next

January 2022.

In this paper, we investigate distortions created by turnover taxes. As a natural experiment, we explore a reform that replaced turnover taxes with value-added taxes for some service industries in China, while the taxation of manufacturing industries remained unchanged. The reform increased sales, R&D investment, and employment for affected service firms, which is primarily driven by outsourcing from downstream manufacturing firms. We document that smaller and less innovative manufacturing firms outsource more, and reallocation increases the quality of innovation for affected service firms. Our study provides new evidence on the negative impact of turnover taxes imposed on business inputs.