Optimizing the Tax Business Environment to Facilitate Value Chain Upgrading

【Authors】

WANG Jing, GUO Jinguang & CHENG Yangfan

【WorkUnit】

WANG Jing, GUO Jinguang （Dongbei University of Finance and Economics, 116025）;CHENG Yangfan（Anhui University of Finance and Economics, 233030）

【Abstract】

Amid profound changes in the global economic landscape, strengthening institutional frameworks to bolster the resilience and security of industrial and supply chains has become imperative, and accelerating the development of independent and controllable industrial and supply chains is also critical. Understanding the role of the business environment in facilitating corporate value chain upgrading has emerged as an important area of concern for society. This study examines the impact of tax business environment optimization on corporate value chain upgrading and its underlying mechanisms, aiming to provide theoretical insights and empirical evidence for a comprehensive assessment of the socioeconomic effects of tax reforms and for exploring effective ways for corporate value chain upgrading.
This study leverages the exogenous policy shock from the pilot reform of “streamlining administration and delegating power, improving regulation, and upgrading services” in China’s tax system. Using listed firm data from 2010 to 2020, a multi-period Difference-in-Differences （DID） model is constructed for empirical investigation. The results reveal that tax business environment optimization significantly promotes corporate value chain upgrading. Heterogeneity analysis further reveals that this effect is more pronounced in firms facing lower financing constraints, firms with weaker corporate governance, firms located in less market-developed regions, and non-manufacturing enterprises. The mechanism analysis identifies three key pathways through which tax business environment optimization drives corporate value chain upgrading: advancing technological innovation, enhancing production efficiency, and strengthening supplier linkages. Moreover, such optimization improves firms’ cost-benefit performance and plays an important role in their global value chain positioning.
This paper makes three key contributions to the literature. First, in terms of research perspective, it enriches the literature on the economic effects of tax business environment optimization and firm-level value chain upgrading. Second, in terms of research indicators, this paper employs firms’ sales share and industry upstreamness to reflect their relative position in the value chain and their control over the industrial chain, constructing a value chain position indicator that captures firm-level characteristics. Third, in terms of research findings, this paper elucidates the pathways through which firms achieve value chain upgrading and provides rigorous empirical evidence for evaluating the “streamlining administration and delegating power, improving regulation, and upgrading services” reform in the tax system.
This study yields three policy implications. First, the government should continuously deepen the “streamlining administration and delegating power, improving regulation, and upgrading services” reform in the tax system and implement more effective policy measures to establish a comprehensive intergovernmental tax cooperation framework. Second, policymakers should explore pathways to promote technological innovation and enhance supplier linkages to empower corporate value chain upgrading and prioritize policy coherence in tax business environment optimization to enhance supply chain management systems. Third, the government should implement differentiated “streamlining administration and delegating power, improving regulation, and upgrading services” policies in the tax system, tailoring measures to local industrial characteristics and economic development conditions. Place-based adaptations are crucial for policy effectiveness.

JEL: H20, H32, D21

【KeyWords】

Value Chain Upgrading, Tax Business Environment Optimization, “Streamlining Administration and Delegating Power, Improving Regulation, and Upgrading Services” in the Tax System