Corporate Tax Burden and the Digitalization of Global Value Chains: Evidence From Chinese Listed Firms

Abstract

Despite the rapid development in digital technology, the influence of taxation on firm-level digital transformation in global value chains (GVCs) remains unclear. To empirically test this impact, this study uses a logit model with a sample comprising 1,742 Chinese listed firms in the period 2003 to 2016. The results indicate that higher tax burdens hinder firms’ participation in the digitalization of GVCs, especially in less developed regions and non-high-tech industries. Furthermore, the results regarding the mediation effects highlight that tax incentives for firms positively impact their ability to invest in research and development and adopt digital technologies, thereby enhancing their potential to participate fully in the digitalization of GVCs. These findings offer valuable insights that deepen the understanding of the role of tax incentives in promoting digital transformation and reshaping firms’ participation in GVCs. JEL Classification: F14, F23, H25, O31.