The Unified Enterprise Tax and SOEs in China / John Whalley, Li Wang.

Format:

Book

Author/Creator:

Whalley, John.

Contributor:

National Bureau of Economic Research.

Wang, Li.

Series:

Working Paper Series (National Bureau of Economic Research) no. w12899.

NBER working paper series no. w12899

Language:

English

Subjects (All):

Government business enterprises--China.

Government business enterprises.

Industrial policy--China.

Industrial policy.

Taxation--China.

Taxation.

China--Economic conditions--2000-.

China.

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2007.

Summary:

Currently proposals are actively circulating in China to move to a unified enterprise tax structure with similar tax treatment of state-owned enterprises (SOEs), other private enterprises (OPE) and foreign investment enterprises (FIEs). FIEs presently receive significant tax preferences through a sharply lower tax rate, tax holidays and other provisions. Here we use analytical representations of SOE behavior, which differ from that of the competitive firm, to argue that a unified tax structure may not be a desirable tax change and that typically a higher tax rate on SOEs is called for on efficiency grounds. Using a worker control model with endogenously determined shirking, taxes on SOEs reduce shirking and a reduced SOE tax rate under a unified tax relaxes discipline on SOEs and losses result. Our results indicate a 0.26% of GDP welfare loss using 2004 data from a unified tax, and larger loss relative to an optimal tax scheme. Alternatively, if we use a managerial control model variant, we find a 0.19% welfare loss from a unified tax, and larger losses relative to initial higher SOE tax rates.

Notes:

Print version record

February 2007.

Includes bibliographical references: p. 19-20.

OCLC:

246909923

Publisher Number:

206595 CaOOCEL (Public Documents)