Why Tax Reduction Policies Cannot Mitigate the Small and Micro Enterprises'Financial Burden
Small and micro enterprises are an important force in China's economic development and play an irreplaceable role in stabilizing market entities,ensuring employment,promoting the growth of the national economy,and advancing technological innovation.In recent years,the Chinese government has implemented a lot of value-added tax reduction policies for small and micro enterprises to support their development.However,there are many media reports on the little effect of tax reductions,and the still heavy taxes and fees burden of small and micro enterprises.Is there a common phe-nomenon of the difficulty in reducing taxes and fees burden for small and micro enterprises?What are the reasons behind it?Answering these questions is of great significance for reducing the tax burden of small and micro enterprises,deepen-ing the reform of the fiscal and taxation system,and promoting the high-quality economic development of China.Using the national tax survey data from 2007 to 2011,this paper takes the policy of uniformly adjusting the two VAT rates of 6％and 4％for small-scale taxpayers to 3％in 2009 as a quasi-natural experiment,and constructs a difference-in-differences(DID)model to explore the tax reduction effect for small and micro enterprises.This paper finds that tax re-ductions are difficult to reduce the total taxes and fees burden,that is,the VAT reduction policy of small and micro enter-prises can effectively reduce their turnover tax burden,but the income tax burden and the social security fee burden of small and micro enterprises increase simultaneously.The comprehensive effect of the VAT reduction policy for small and micro enterprises is that their total taxes and fees burden have not changed significantly.As a result,small and micro enterprises'sense of tax reductions is not obvious.The reason for the difficulty in reducing taxes and fees burden lies in that VAT is a shared tax between the central and local governments,and the implementation of the VAT reduction policy increases the fi-nancial pressure faced by local governments.In response,they may make use of the existing space for the collection and management of corporate income tax and social security fees to strengthen the collection and management,so that the bur-den of corporate income tax and the burden of social security fee increases.The greater the financial pressure and the exist-ing collection and management space,the more obvious the increase in corporate income tax burden and social security fee burden.This paper also finds that the VAT reduction policy cannot directly alleviate the problem of"difficult and expensive financing"for small and micro enterprises by reducing the total taxes and fees burden.However,the VAT reduction policy can release favorable signals to financial institutions such as banks,reduce the financing cost of small and micro enterprises with high financing constraints,and increase their cash flow,indirectly alleviating the problem of"difficult and expensive fi-nancing"for small and micro enterprises.This paper provides important decision-making reference for improving the effect of tax reductions and further improving the policy effect of reducing total taxes and fees burden for small and micro enter-prises.The important innovations of this paper are reflected in the following three aspects.Firstly,it focuses on the evaluation of the policy effect of VAT reductions for small and micro enterprises.Most of the existing studies focus on the evaluation of the tax reduction policy effect for large and medium-sized enterprises while ignoring small and micro enterprises.Secondly,it comprehensively analyzes the impact of the VAT reduction policy for small and micro enterprises on the turnover tax bur-den,enterprise income tax burden,fees burden,and total taxes and fees burden,verifying the existence of substitution among different tax types and substitution between taxes.Thirdly,this paper verifies that the financial pressure caused by tax reductions is an important reason for the difficulty in reducing taxes and fees burden,and finds that whether there is col-lection and management space is another important reason.The premise of the government strengthening collection and management based on financial pressure lies in whether there is manipulable collection and management space.
Small and Micro EnterprisesVAT Reduction PolicyTotal Taxes and Fees BurdenFinancial PressureCollection and Management Space
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