Digital tax administration and enterprise innovation: Evidence from the Golden Tax Project III in China

Abstract

As the advancement of digital tax administration can generate both “governance effect” and “taxation effect” for enterprises, its impact on enterprise innovation is not clear. Relying on the implementation of “The Golden Tax Project III” in China, this paper investigates the causal relationship between digital tax administration and enterprise innovation through a staggered difference-in-differences method. It can be found that digital tax administration increases patent applications, patent authorizations, and research and development (R&D) investment of enterprises, demonstrating an obvious innovation incentive effect. Relaxing financing constraints on enterprise innovation by reducing enterprise management costs and improving enterprise credit capacity, is an important mechanism in digital tax administration incentivizing enterprise innovation. Further analysis reveals that digital tax administration can promote independent innovation and high-quality innovation, but its impact on collaborative innovation and low-quality innovation is minimal or insignificant. Compared to state-owned enterprises, digital tax administration has a more pronounced innovation incentive effect on non-state-owned enterprises. This paper provides evidence from the field of tax administration for the innovation effect driven by big data.