Computerizing VAT Invoices in China
This paper documents that an increase in the enforcement of value-added tax (VAT) caused by the adoption of a new technology significantly increased VAT payments by large manufacturing firms in China. The reform contributed to 27.1% of VAT revenues and 12.9% of total government revenues in the five subsequent years. The main mechanism is likely to be a reduction in VAT deductions. The dynamic effects of the reform suggest that the rise in tax revenues is non-monotonic over time, with large short-run gains and smaller, though still positive, long-run gains. The reform also reduced firm revenues and inputs, and increased productivity.
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Copy CitationHaichao Fan, Yu Liu, Nancy Qian, and Jaya Wen, "Computerizing VAT Invoices in China," NBER Working Paper 24414 (2018), https://doi.org/10.3386/w24414.
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