Taxation in a mixed economy: the case of China

Davidson, S and Li, L 2017, 'Taxation in a mixed economy: the case of China', Studies in Economics and Finance, vol. 34, no. 1, pp. 49-61.


Document type: Journal Article
Collection: Journal Articles

Title Taxation in a mixed economy: the case of China
Author(s) Davidson, S
Li, L
Year 2017
Journal name Studies in Economics and Finance
Volume number 34
Issue number 1
Start page 49
End page 61
Total pages 13
Publisher Emerald
Abstract Purpose: The purpose of this paper is to investigate how Chinese firms' ownership structure is related to their effective tax rate. The People's Republic of China provides an interesting environment to examine the corporate income tax. Government has significant ownership stakes in the for-profit economy and state-owned enterprises (SOEs) are liable to the corporate income tax. This is very different to most other economies where SOE tends to dominate the not-for-profit economy and pays no corporate income tax. Government ownership also varies between the central government and local government in addition to state asset management bureaus. This provides a rich institutional background to examining the corporate income tax. Design/methodology/approach: A panel data analysis approach is used to examine relationship between ownership structure and effective tax rates of all public firms in China from 1999 to 2009. Findings: The authors report that effective tax rates do appear to vary across the ownership types, but that SOEs pay a statistically higher effective tax rate than to non-state-owned. In addition, local government owned SOE pay higher effective tax rates than central government and SAMB owned SOE. The authors also investigate Zimmerman's (1983) political cost hypothesis. Unfortunately, these results are econometrically fragile with the statistical significance of those results varying by empirical technique. Originality/value: This paper provides insight into government ownership and taxation in China.
Subject Public Economics- Taxation and Revenue
Keyword(s) China
Corporate income tax
Effective tax rates
State owned enterprise
DOI - identifier 10.1108/SEF-08-2015-0183
Copyright notice © 2017 Emerald Publishing Limited
ISSN 1086-7376
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