The impact of enterprise income tax on firm export: Evidence from income tax revenue sharing reform in China

Abstract

This paper exploits the Income Tax Revenue Sharing reform in China to study the impact of enterprise income tax (EIT) on firm export. The reform switched income tax collection from the local to the state administration of taxation and reduced the effective enterprise income tax rate (ETR) by around 10–12 %. Furthermore, the reform only applied to firms established after January 2002, allowing us to use regression discontinuity design (RDD) to identify its effect. The results show that though has no significant impact on firm export probability, lower ETR improves export intensity and export product quality of export firms due to the positive effect of lower ETR on firm productivity. Moreover, the reform has a bigger impact on firms with financial constraint.