The optimization of the business environment can change the game balance between the govern-ment and the market and improve the tax efforts of government and fiscal capacity.This paper constructed a"government-enterprise"two-sector Stackelberg game model as a theoretical analysis framework.Then,using China's Administrative Approval Reform as a"quasi natural experiment"for local governments to im-prove the business environment,matching the Chinese industrial enterprise database,this paper has investi-gated the causality of the relationship between improvement of the business environment and local fiscal ca-pacity.It is found that the optimization of the business environment represented by the reform of the adminis-trative approval system contributes to the improvement of local financial capacity,which is reflected in the significant improvement of corporate tax compliance.The effect is more pronounced in corporate under the jurisdiction of local tax bureaus,private corporate,and small-scale corporate,and proves the theoretical mechanism that the optimization of business environment affects local governments'tax efforts and then im-proves corporate tax compliance.The conclusions of this paper has profound policy enlightenment for impro-ving the country's fiscal capacity from the path of improving the business environment.
business environmentAdministrative Approval Reformlocal fiscal capacitycorporate tax compliance
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