The Effect of VAT on Productivity in China-Based on the SFA Model Test

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Abstract: This paper adopts trans-log production function based on the SFA model, empirically test how the change of the proportion of the value added tax impacts on each part of China’s productivity. The results show: that, in tax structure, if the proportion of the value added tax is higher, the more conducive to the improvement of production efficiency. But it is not good for the technical efficiency and scale efficiency. This means the effects of value added tax on productivity is complex in china. We suggest, in the design of the VAT system, we should pay more attention to its influence on productivity. For example, implement value added tax subsidy for technology research and development (R&D).Focus on the adjustment effect of value added tax on the specialized division of labor.

WSEAS Transactions on Business and Economics, ISSN / E-ISSN: 1109-9526 / 2224-2899, Volume 11, 2014, Art. #31

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Jiang Yan Feng, "The Effect of VAT on Productivity in China-Based on the SFA Model Test," WSEAS Transactions on Business and Economics, vol. 11, pp. 339-349, 2014, DOI:
Jiang Yan Feng. The Effect of VAT on Productivity in China-Based on the SFA Model Test. WSEAS Transactions on Business and Economics. 2014;11:339-349.
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