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The Dynamic Effects of Computerized VAT Invoices on Chinese Manufacturing Firms

Haichao Fan, Yu Liu, Nancy Qian, Jaya Wen

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

This paper uses a balanced panel of large manufacturing firms to provide novel evidence on the dynamic effects of computerizing VAT invoices on tax revenues and firm behavior in China, 1998-2007. We find that computerization explains 14.38% of cumulative VAT revenues and increases the effective average tax rate by approximately 4.7-14% in the seven subsequent years. The evidence suggests that the effects of computerization change over time: tax revenue gains are likely to be smaller in the long run. Meanwhile, firms reduce output and input, and increase productivity monotonically over time.

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Document Object Identifier (DOI): 10.3386/w24414

 
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