Rent-Tax Substitution and Its Impact on Firms: Evidence From Housing Purchase Limits Policy in China

Posted: 14 Jul 2020 Last revised: 15 Jul 2020

See all articles by Renjie Zhao

Renjie Zhao

affiliation not provided to SSRN

Jiakai Zhang

City University of New York (CUNY), The Graduate Center, Department of Economics

Date Written: June 21, 2020

Abstract

Using a novel source of quasi-experimental variation in the revenue of the local government from housing purchase limits policy, we investigate the mechanism of "rent-tax substitution" from 2008 to 2015. The "rent-tax substitution" refers to the substitute relationship between the tax revenue and the land grant premium (rent of land use rights) of local government in China. Our findings indicate that contrary to other cities, the cities implementing housing purchase limits policy (HPLP) have 48.28% less land grant premium but 14.96% more tax revenue. We also examine how the HPLP affect the firm. The results show that the implementation of the HPLP increases the tax burden of local firms, particularly the burden arising from corporate income tax. Furthermore, HPLP negatively influences firms in different aspects concerning investment, employment, and wage.

Keywords: Housing purchase limits policy, Government revenue, Land grant premium, Tax burden

JEL Classification: G18, H71, R52

Suggested Citation

Zhao, Renjie and Zhang, Jiakai, Rent-Tax Substitution and Its Impact on Firms: Evidence From Housing Purchase Limits Policy in China (June 21, 2020). Available at SSRN: https://ssrn.com/abstract=3640609

Renjie Zhao

affiliation not provided to SSRN

Jiakai Zhang (Contact Author)

City University of New York (CUNY), The Graduate Center, Department of Economics ( email )

365 Fifth Avenue
New York, NY 10016
United States
6077680809 (Phone)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
164
PlumX Metrics