Does Tax Incentives Promote Additional Foreign Investment:Evidence Based on Value-Added Tax Reform
Based on the China Industrial Enterprises Database and the Ministry of Commerce's Foreign Investment Approval(Record)Database,this paper constructs a difference-in-differ-ences(DID)with multiple time periods using the value-added tax(VAT)reform as an exoge-nous shock to explore the mechanism of the impact of tax incentives on the additional foreign in-vestment in China.The paper finds that VAT reform significantly promotes additional foreign in-vestment in China.In terms of the impact mechanism,the VAT reform promotes additional for-eign investment by lowering the production and operation costs of enterprises,improving the pro-duction efficiency of enterprises,and promoting the market expansion of enterprises.Heterogene-ity analysis shows that the VAT reform has a more prominent effect on the foreign capital addition behavior of small-sized enterprises,and enterprises with high financing capacity,with low fixed asset investment activity,and in low-competitive industries.
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