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Taxpayer Self-Inspections, Audits, And Optimal Tax Administration: Evidence From China, Wei Cui
Taxpayer Self-Inspections, Audits, And Optimal Tax Administration: Evidence From China, Wei Cui
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I document an important tax collection practice that is previously unknown to research on tax administration: mandatory taxpayer self-inspections. The practice emerged spontaneously across China in the 1990s and persists to this day despite having no basis in law. If taxpayers report additional liabilities after self-inspections, no penalties are imposed. Unlike tax amnesties, self-inspections are (i) backed up by the threat of government inspections with a significantly higher-than-normal audit probability, and (ii) used as a basic, routine revenue-generation technique. I show that self-inspections represent roughly 50% of the activity in China’s “tax inspection” (jicha) system and assume even greater importance …
Cash On The Table? Imperfect Take-Up Of Tax Incentives And Firm Investment Behavior, Wei Cui, Jeffrey Hicks, Jing Xing
Cash On The Table? Imperfect Take-Up Of Tax Incentives And Firm Investment Behavior, Wei Cui, Jeffrey Hicks, Jing Xing
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We investigate whether tax incentives are effective in stimulating private investment in less developed countries, by exploiting the introduction of accelerated depreciation for fixed assets investment in China as a natural experiment. In contrast to the large positive impact of similar tax incentives in the U.S. and U.K. found in recent studies, accelerated depreciation appeared ineffective in stimulating Chinese firms’ investment. Using confidential corporate tax returns from a large province, we find that firms fail to claim the tax benefits on over 80 percent of eligible investments. Firms’ take-up of the tax incentive is significantly influenced by their taxable positions …