Abstract: Based on theoretical analysis, this paper empirically studies the effects of China’s VAT system transition in 2009 on firms’ fixed capital investment and employing recruitment by using the data of National Tax Survey from the year 2008 to 2009 for the first time. Main findings are as follows. (1) The transition stimulates the investment in some industries like Petrochemical, Electricity and Equipment Manufacturing, but Automotive Industry and Extractive Industry are exceptional. (2) The transition impedes the growth of employment in Processing Industry for Agricultural Products and Petrochemical Industry, but improves the employment in industries like Electricity and Automotive. The prosperity and marketization degree of industries are key factors determining the effects above. Our findings show that the effects of China’s VAT system transition are various in different industries, implying that when implementing the VAT-related reforms like the reform program to turn business tax into VAT, Chinese government should design relevant institutions with regard to macroeconomic situation and industrial difference, and gradually put reform measures into practice.
Keywords: Overall Transition of the VAT System, Fixed Capital Investment, Employing Recruitment, Propensity Score Matching
source:Finance & Trade Economics ,No6,2014