TY - JOUR
T1 - The effect of a fiscal squeeze on tax enforcement
T2 - Evidence from a natural experiment in China
AU - Chen, Shawn Xiaoguang
PY - 2017/3/1
Y1 - 2017/3/1
N2 - This paper investigates the impact of the abolition of the agricultural taxes in 2005 across China on county governments’ incentives for tax enforcement. I show that the revenue loss of county governments was largely offset by tougher tax enforcement. The incentive for VAT enforcement can be weakened, however, if the county: (1) receives a lower share of total VAT revenues; (2) has a broader VAT tax base; or, (3) has more abundant sources of revenue from land sales. These findings suggest that incentives of local governments can be vital to tax enforcement and to the tax capacity of a country.
AB - This paper investigates the impact of the abolition of the agricultural taxes in 2005 across China on county governments’ incentives for tax enforcement. I show that the revenue loss of county governments was largely offset by tougher tax enforcement. The incentive for VAT enforcement can be weakened, however, if the county: (1) receives a lower share of total VAT revenues; (2) has a broader VAT tax base; or, (3) has more abundant sources of revenue from land sales. These findings suggest that incentives of local governments can be vital to tax enforcement and to the tax capacity of a country.
KW - Local governments
KW - Tax capacity
KW - Tax enforcement
UR - http://www.scopus.com/inward/record.url?scp=85012278020&partnerID=8YFLogxK
U2 - 10.1016/j.jpubeco.2017.01.001
DO - 10.1016/j.jpubeco.2017.01.001
M3 - Article
SN - 0047-2727
VL - 147
SP - 62
EP - 76
JO - Journal of Public Economics
JF - Journal of Public Economics
ER -