NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Computerizing VAT Invoices in China

Haichao Fan, Yu Liu, Nancy Qian, Jaya Wen

NBER Working Paper No. 24414
Issued in March 2018, Revised in April 2020
NBER Program(s):Development Economics, Public Economics

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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Document Object Identifier (DOI): 10.3386/w24414

 
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