“Chip War” Enlightenment: The Effect of Value-added Tax on Investment and Research and Development of High-tech Enterprises

Abstract

In the trade war between China and the United States, the competitive position of high-tech industries has become increasingly prominent. We examine how high burden of China’s value-added tax (VAT) in high-tech industry affects firms’ investment, R&D, and innovation. Study shows that: (1) the reduction of VAT tax burden significantly promoted business investment, R&D investment and technological innovation; (2) the "deductible" and "return" policies also significantly increased such activities (3) among the "chip" firms, the reduction of VAT has a significant positive effect on business investment; but its impact on technological innovation and R&D expenditure is not significant.