Further advices on value-added tax policy for different purposes under different economic conditions of one certain country.

Further advices on value-added tax policy for different purposes under different economic conditions of one certain country.</p

Impact of the reduced VAT output tax rate on the number of newly purchased productive material assets, labor and financial assets (Model 4.2).

The line with a cross represents the relationships between the VAT output tax rate and various assets when maintaining the VAT input tax rate at 13%, transferring the VAT input tax forward to the enterprises themselves meanwhile transferring the VAT output tax forward to the consumers (τ = 1.01, ζ = 1, ηi = 13%). The line with a circle represents the relationships between the VAT output tax rate and various assets when maintaining the VAT input tax rate at 13%, transferring the VAT input tax forward to the enterprises themselves meanwhile transferring the VAT output tax backward to the enterprises themselves (τ = 1.01, ζ = 0.98, ηi = 13%). The line with an asterisk represents the relationships between the VAT output tax rate and various assets when maintaining the VAT input tax rate at 13%, transferring the VAT input tax backward to the material suppliers meanwhile transferring the VAT output tax forward to the consumers (τ = 0.97, ζ = 1, ηi = 13%). The line with a dot represents the relationships between the VAT output tax rate and various assets when maintaining the VAT input tax rate at 13%, transferring the VAT input tax backward to the material suppliers meanwhile transferring the VAT output tax backward to the enterprises themselves (τ = 0.97, ζ = 0.98, ηi = 13%). The line with a fork represents the relationships between the VAT output tax rate and various assets when maintaining the VAT input tax rate at 9%, transferring the VAT input tax forward to the enterprises themselves meanwhile transferring the VAT output tax forward to the consumers (τ = 1.01, ζ = 1, ηi = 9%). The line with a square represents the relationships between the VAT output tax rate and various assets when maintaining the VAT input tax rate at 9%, transferring the VAT input tax forward to the enterprises themselves meanwhile transferring the VAT output tax backward to the enterprises themselves (τ = 1.01, ζ = 0.98, ηi = 9%). The line with a rhombus represents the relationships between the VAT output tax rate and various assets when maintaining the VAT input tax rate at 9%, transferring the VAT input tax backward to the material suppliers meanwhile transferring the VAT output tax forward to the consumers (τ = 0.97, ζ = 1, ηi = 9%). The line with a triangle represents the relationships between the VAT output tax rate and various assets when maintaining the VAT input tax rate at 9%, transferring the VAT input tax backward to the material suppliers meanwhile transferring the VAT output tax backward to the enterprises themselves (τ = 0.97, ζ = 0.98, ηi = 9%).</p

Further developments for improving China’s value added tax policy.

Further developments for improving China’s value added tax policy.</p

VAT rate combinations when reducing the VAT output or input tax rate respectively.

VAT rate combinations when reducing the VAT output or input tax rate respectively.</p

Positive and negative features of value-added tax policy in China.

Positive and negative features of value-added tax policy in China.</p

Proofs of Proposition 4 and 5.

The article sought to detect the impact of the value-added tax (VAT) policy on the enterprises’ asset allocation from the dual perspectives of the VAT input refund and the VAT rate. Based on the influenced mechanism of the VAT input refund and the tax burden effect (and the price effect) caused by the VAT rate, enterprises’ intertemporal optimal asset allocation models are constructed under the states of adopting the VAT input refund and maintaining the theoretical tax (non-)neutrality of VAT. When VAT rates of the general taxpayers are predicted to be reduced, we also use China’s manufacturing and economic data to simulate specific cases to verify propositions under different states. The results show that: (1) When the VAT output tax rate decreases: if returns to scale are diminishing, enterprises will increase the number of productive material assets and labor and reduce financial assets. (2) When the VAT input tax rate reduces: under the state of adopting the VAT input refund and maintaining the theoretical tax (non-)neutrality of VAT, if returns to scale are decreasing, enterprises will reduce the number of productive material assets and labor and increase financial assets. Under the state of adopting the VAT input refund and maintaining the theoretical tax neutrality of VAT, if returns to scale are increasing and the expected rate of return of financial assets is lower than the additional tax rate, or the enterprise has diminishing returns to scale and the expected rate of return of financial assets is higher than the additional tax rate, enterprises will increase the number of productive material assets and labor. (3) When VAT output and input tax rates reduce simultaneously: under the state of adopting the VAT input refund and maintaining the theoretical tax neutrality of VAT, if returns to scale are increasing and the expected return rate of financial assets is higher than the additional tax rate, the enterprise will reduce the number of productive material assets and labor and increase financial assets. Under the diminishing returns to scale in China’s national economy, the research conclusions endorse the rational necessity of the VAT policy change—VAT rate reduction to develop the entity economy and provide a reference for enterprises to make asset allocation decisions. The conclusions also provide possible changes in VAT policy for different countries according to their actual economic conditions.</div

Time-varying elasticity coefficients of national economic output under local linear estimation.

Time-varying elasticity coefficients of national economic output under local linear estimation.</p

Impact of joint reduction of VAT output and input tax rates on the number of the newly purchased productive material assets, labor, and financial assets (Model 4.1).

The changes in the number of newly purchased productive material assets, labor and financial assets triggered by the joint reduction of VAT output and input tax rates were generated in Matlab2022.</p

Impact of the reduced VAT input tax rate on the number of newly purchased productive material assets, labor and financial assets (Model 4.2).

The line with a lower triangle represents the relationships between the VAT input tax rate and various assets when maintaining the VAT output tax rate at 13%, transferring the VAT input tax forward to the enterprises themselves meanwhile transferring the VAT output tax forward to the consumers (τ = 1, ζ = 1, ηi = 13%). The line with a right triangle represents the relationships between the VAT input tax rate and various assets when maintaining the VAT output tax rate at 13%, transferring the VAT input tax forward to the enterprises themselves meanwhile transferring the VAT output tax backward to the enterprises themselves (τ = 1, ζ = 0.98, ηo = 13%). The line with a left triangle represents the relationships between the VAT input tax rate and various assets when maintaining the VAT output tax rate at 13%, transferring the VAT input tax backward to the material suppliers meanwhile transferring the VAT output tax forward to the consumers (τ = 0.97, ζ = 1, ηo = 13%). The line with a pentagram represents the relationships between the VAT input tax rate and various assets when maintaining the VAT output tax rate at 13%, transferring the VAT input tax backward to the material suppliers meanwhile transferring the VAT output tax backward to the enterprises themselves (τ = 0.97, ζ = 0.98, ηo = 13%). The line with a hexagon represents the relationships between the VAT input tax rate and various assets when maintaining the VAT output tax rate at 9%, transferring the VAT input tax forward to the enterprises themselves meanwhile transferring the VAT output tax forward to the consumers (τ = 1, ζ = 1, ηo = 9%). The line with a rhombus represents the relationships between the VAT input tax rate and various assets when maintaining the VAT output tax rate at 9%, transferring the VAT input tax forward to the enterprises themselves meanwhile transferring the VAT output tax backward to the enterprises themselves (τ = 1.01, ζ = 0.98, ηo = 9%). The line with an asterisk represents the relationships between the VAT input tax rate and various assets when maintaining the VAT output tax rate at 9%, transferring the VAT input tax backward to the material suppliers meanwhile transferring the VAT output tax forward to the consumers (τ = 0.97, ζ = 1, ηo = 9%). The line with a dot represents the relationships between the VAT input tax rate and various assets when maintaining the VAT output tax rate at 9%, transferring the VAT input tax backward to the material suppliers meanwhile transferring the VAT output tax backward to the enterprises themselves (τ = 0.97, ζ = 0.98, ηo = 9%).</p

GDP growth rate of OECD countries from 2018 to 2021.

GDP growth rate of OECD countries from 2018 to 2021 was generated in STATA17 according to data from OECDiLibrary.</p