Another Aspect of Micro"Shifting from Real to Fictitious Sector":Reduction of Deed Tax Rate and Real Estate Speculation of Enterprises
The capital allocation of rational enterprises always trade-offs between real and fictitious economies.Corporate investment has been shifting from the real to the fictitious sector in recent years.There is a large amount of capital trapped in the fictitious sector,which corresponds to a continuous decline in the industrial investment rate.Due to the coronavirus pandemic and international trade conflicts,many industrial enterprises have reduced their main businesses to stop loss and preserve assets through virtualization.The Chinese government has promised to guide enterprises to return to the real economy and prevent economic stagnation.However,the fictitious economy includes not only finance but also real estate,which has absorbed a large amount of funds.There were 2,389 listed companies holding real estate as at the end of 2021,accounting for approximately 51%,with a total investment of 4.05 trillion yuan.In addition to financialization,this is another manifestation of China's economy shifting from the real to the fictitious sector.The 14th Five-Year Plan proposed to use tax policies to regulate the real estate market,which means supporting residential demand and curbing speculative demand.This article uses the discretionary adjustment of deed tax rates by local governments in China as a quasi-natural experiment to explore the impact of deed tax cuts on corporate real estate speculation and analyze the effectiveness of tax cuts in guiding micro capital allocation and balancing developments of the real estate market and the real economy.Our study makes the following conclusions.(1)Reducing the deed tax rate(RDTR)can significantly suppress corporate real estate speculation,especially financialized real estate investment.We conduct a series of robustness tests,including parallel trend test and placebo test,using other regression methods,replacing variables,and excluding competitive hypothesis.(2)The impact of RDTR on real estate speculation is more evident in enterprises with tighter financing constraints,heavier tax,and fee burden;higher stock price risk;or lower price-earning ratio,as well as in areas with poorer business environment or higher dependence on"land finance."(3)RDTR mainly affects corporate real estate speculation through the"reservoir effect"and substitution effect.Specifically,RDTR reduces the expected operational risk and internal financial risk of industrial enterprises and increases the return on investment of the real economy relative to real estate.(4)RDTR encourages enterprises to optimize capital allocation by increasing innovation and equipment investment and reducing rent-seeking expenses.This study makes the following three contributions to the literature.(1)The taxes levied on real estate in Chinese Mainland include not only property tax for owners but also deed tax for buyers.It has a significant financial contribution and the reform included a wide range of regions.Scholars have generally been enthusiastic about property taxes,but the micro effects of deed tax policies have not been discussed yet.This article takes the discretionary adjustments of local deed tax rates as a quasi-natural experiment,which is a new approach to research on the relationship between tax and real estate in China.(2)China urgently needs to reverse the economic trend of"shifting from real to fictitious sector."The existing studies extensively focused on the excessive financialization of industrial enterprises,while overlooking their speculation in real estate.Did RDTR build a"tax depression"to attract more funds to the real estate market?This article provides direct empirical evidence,which is meaningful for China to regulate the real estate market and support the development of the real economy.(3)This article reveals that the purpose of enterprise speculation in real estate is to avoid risks,pursue profits,and identify enterprises and regions where RDTR can have an inhibitory effect,which is helpful for the targeted design of industrial policies.
Shifting from Real to Fictitious SectorDeed TaxReal Estate SpeculationReal EconomyTax Cuts