The Effect of Tax-Collection Mechanism and Management on Enterprise Technological Innovation: Evidence from China

Tax collection and management is an important cornerstone to safeguard a country's financial strength, and it is also a key task to realize the modernization of a country's tax governance. This study examines the effect of tax-collection mechanism and management on technological innovation in China from 2007 to 2020. By using a fixed effect model, the findings indicate that a higher intensity of regional compulsory tax collection and management rises the level of technological innovation of enterprises. Strengthening tax collection and management is more conducive to raising the level of technological innovation of midwestern enterprises, non-high-tech enterprises and enterprises in a poor market environment. The concrete impact mechanism shows that tax collection and management improve the level of enterprises and technology innovation by using a tax credit-rating system and enhancing enterprises' information transparency; the application of the Golden Three system has been more conducive to strengthening tax collection and management to enhance the level of enterprises' technological innovation. The findings of this study have policy implications for China regarding rising innovation through tax collection

Automated summary

This study examines the impact of tax collection mechanism and management on technological innovation in China, and finds that higher intensity of regional tax collection and management can enhance the level of technological innovation in enterprises. Strengthening tax collection and management is particularly beneficial for midwestern enterprises, non-high-tech enterprises, and enterprises in poor market environments. The study also identifies specific mechanisms, including the use of tax credit-rating system and enhancing information transparency, through which tax collection and management can improve the level of enterprises' technological innovation.