1. Estimated number of words: 7,500 English words
2. Title of paper: VAT Coverage Expansion Reform and Specialization: Evidences from Chinese Listed Companies
3. When will the English manuscript ready to be copy-edited: September 16, 2019.
4. When shall the copy-editor finish first edit: within 10 days.
5. Partial text:
Abstract: This paper studies the year 2008~2015 data of Chinese listed companies to test the two possibilities that VAT coverage expansion reform facilitates specialization by use of the difference-in-differences (DID) method. Firstly, we discover from the changes in scope of business that certain manufacturers provide manufacturing services, which had been for internal use only, to pick up business revenue. Secondly, certain service providers receive significantly increased business revenue after the reform, indicating that these enterprises have received more outsources from the manufacturers. Heterogeneity analysis on various types of sectors involved in the “VAT coverage expansion reform” further proves the aforesaid mechanism. We have ruled out the motivation of tax avoidance by testing the changes in actual tax burden. The placebo testing also proves that the changes in scope of business is indeed resulted from the VAT coverage expansion reform.
How macroscopic tax policies result in microscopic consequences has been a hot subject of studies, which focus on corporate income tax and dividend tax (Sialm, 2009; Hasan et al., 2014; Doidge and Dyck, 2015; Yagan, 2015; Garrett et al.,2019) while rarely touch on value-added tax (VAT).
Since the VAT was levied in France in 1954, over 160 countries and regions are now levying VAT, which covers a significant percentage in the national tax revenue. From macroscopic perspective, the VAT policies can influence both economic growth and social welfare of a county.