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Incomplete VAT rebates to exporters : how do they affect China's export performance?

Author

Listed:
  • Julien Gourdon
  • Stéphanie Monjon
  • Sandra Poncet
Abstract
During the last decade, the Chinese government has frequently changed the value added tax (VAT) refund levels offered to exporters. Indeed, China's VAT system is not neutral, in particular because the exporters may not receive complete refund of the domestic VAT paid on their inputs. This paper investigates how changes in the VAT rebates affect export performance in China. Our empirical analysis relies on export volume data at the HS6 product level over the 2003-12 period. To address potential endogeneity, we exploit an eligibility rule that disqualifies processing trade with supplied materials from the rebates. We find that the adjustments to the VAT rebates have significant repercussions on the exported volume: a one percentage point increase in the VAT rebate can lead to a 7% increase in export volumes. This magnitude allows to better understand the strong resistance of China's exports amid the global recession.

Suggested Citation

  • Julien Gourdon & Stéphanie Monjon & Sandra Poncet, 2014. "Incomplete VAT rebates to exporters : how do they affect China's export performance?," Working Papers 2014-05, CEPII research center.
    • Handle: RePEc:cii:cepidt:2014-05
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    Cited by:

    1. L. An & C. Hu & Yong Tan, 2017. "Regional effects of export tax rebate on exporting firms: Evidence from China," Review of International Economics, Wiley Blackwell, vol. 25(4), pages 774-798, September.
    2. Gourdon, Julien & Monjon, Stéphanie & Poncet, Sandra, 2016. "Trade policy and industrial policy in China: What motivates public authorities to apply restrictions on exports?," China Economic Review, Elsevier, vol. 40(C), pages 105-120.
    3. Qian, Nancy & Liu, Yu & Wen, Jaya & Fan, Haichao, 2018. "The Dynamic Effects of Computerized VAT Invoices on Chinese Manufacturing Firms," CEPR Discussion Papers 12786, C.E.P.R. Discussion Papers.
    4. Johannes Van Biesebroeck & Jozef Konings & Christian Volpe Martincus, 2016. "Did export promotion help firms weather the crisis?," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 31(88), pages 653-702.
    5. Xuefeng, Qian & Yaşar, Mahmut, 2016. "Export Market Diversification and Firm Productivity: Evidence from a Large Developing Country," World Development, Elsevier, vol. 82(C), pages 28-47.
    6. Wonkyung Lee & Hong Ma & Yuan Xu, 2021. "Export tax rebate and the margins of exports: product-level evidence from a quasi-natural experiment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(2), pages 386-404, April.
    7. Zhang, Yan & Bai, Zhuoran & Findaly, Christopher, 2021. "Value-added Tax Reform and Services Exports: Evidence from China," MPRA Paper 111184, University Library of Munich, Germany, revised 2021.
    8. Tan, Yong & Han, Jian & Ma, Yeqing, 2015. "Multi-product firms, product scope, and the policy of export tax rebate," China Economic Review, Elsevier, vol. 35(C), pages 33-46.
    9. Liu, X., 2018. "Export Tax Rebate Policy in Chinese Fishery Sector: Who are the Beneficiaries?," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277454, International Association of Agricultural Economists.
    10. Haichao Fan & Yu Liu & Nancy Qian & Jaya Wen, 2018. "Computerizing VAT Invoices in China," NBER Working Papers 24414, National Bureau of Economic Research, Inc.
    11. Eisenbarth, Sabrina, 2017. "Is Chinese trade policy motivated by environmental concerns?," Journal of Environmental Economics and Management, Elsevier, vol. 82(C), pages 74-103.
    12. Liang, Yue & Lu, Wencong, 2024. "Do export tax rebates promote firm upgrading? Evidences from labor-intensive firms in China," Journal of Asian Economics, Elsevier, vol. 90(C).
    13. Liu, Xuepeng & Shi, Huimin & Ferrantino, Michael, 2016. "Tax evasion through trade intermediation: Evidence from Chinese exporters," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 518-535.
    14. Yasheng Huang & Heiwai Tang, 2018. "Are foreign firms favored in China? Firm-level evidence on the collection of value-added taxes," Journal of International Business Policy, Palgrave Macmillan, vol. 1(1), pages 71-91, June.
    15. Lyudmila P. Koroleva, 2020. "Impact of Value Added Tax on Macro-Economic Parameters of the Russian Economy," Journal of Tax Reform, Graduate School of Economics and Management, Ural Federal University, vol. 6(1), pages 22-35.
    16. Liu, Xinran & Ge, Wei, 2018. "Who Benefits from the Export Tax Rebate Policy? Evidence from the Chinese Fishery Sector," Studies in Agricultural Economics, Research Institute for Agricultural Economics, vol. 120(2), August.

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    More about this item

    Keywords

    VAT system; Export tax; Export performance; China;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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