Institutional Environment, Ownership and Firm Taxation
Economics of Transition, Forthcoming
52 Pages Posted: 13 Dec 2012
Date Written: December 12, 2012
Abstract
This paper examines how ownership type and institutional environment affect firm taxation. Using a sample of Chinese listed firms from 1999 to 2006, we find that private firms enjoy a lower effective tax rate than local state-owned enterprises. In addition, the preferential taxation of private firms is associated with local government’s incentives to promote local economic growth. We find that private firms located in regions with a lower level of privatization receive preferential tax treatment. Our results also suggest that decentralization and interjurisdictional competition lead to financial interdependence between local governments and private firms.
Keywords: Ownership, Taxation, Institution, Interjurisdictional competition, China
JEL Classification: G32, G38, H25
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