Abstract
This paper investigates the effect of Phase 2 of the Golden Tax Project on the value-added tax (VAT) in China. The reform introduced computer-generated invoices and electronic transaction linking. Using a difference-in-differences strategy, we show that the reform increased VAT by re-ducing exaggerated VAT deductions. The introduction of the new digital technology had large positive effects on Chinese fiscal capacity. VAT gains from the reform explain approximately 13.7% of VAT growth dur-ing 1998–2007.
Original language | English (US) |
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Pages (from-to) | 101-122 |
Number of pages | 22 |
Journal | Tax Policy and the Economy |
Volume | 38 |
Issue number | 1 |
DOIs | |
State | Published - 2024 |
Funding
Top officials recognized the severe drawbacks of the analog system and, within months of its implementation, began to experiment with digitization. In March 1994, the government piloted a digital VAT system for 50 cities, which they dubbed the \u201CGolden Tax Project.\u201D The state-owned Great Wall Computer Group Company implemented the rollout with support from the People\u2019s Bank of China, the National Development and Reform Commission, and the Aerospace Industry Corporation. The
ASJC Scopus subject areas
- Finance
- Economics and Econometrics