Tax Incentives, Supply Chain Spillovers, and Digital Transformation
Abstract: Accelerating the digitization of industries is a key focus in building a digital China, and it is worth investigating whether government tax incentives aimed at alleviating corporate tax burdens can facilitate digital transformation. Precisely identifying the targets of tax incentive policies is a practical choice for actively leveraging the effects of tax incentives under limited government financial resources, and it is also an inherent requirement for comprehensively enhancing the effectiveness of fiscal policies. This paper examines how to maximize the effects of tax incentives and drive digital transformation across the entire industrial chain from the perspective of supply chain spillovers. Using national enterprise tax survey data and enterprise supply chain data from 2008 to 2016, the study finds that tax incentives for downstream enterprises significantly promote the digital transformation of midstream enterprises, while tax incentives for upstream enterprises have insignificant effects on the digital transformation of midstream enterprises. This is primarily related to the significant differences in monopoly power between upstream and downstream enterprises. Tax incentives for downstream enterprises not only optimize their own business performance but also drive cash flow optimization and scale expansion of midstream enterprises through supply chain transmission, facilitating data sharing within the industrial and supply chains, enabling midstream enterprises to have sufficient funds for human capital upgrades and investments related to digitization. Upstream enterprises, due to their strong monopoly power, experience blocked transmission effects, failing to achieve similar spillover effects as tax incentives for downstream enterprises. This study provides empirical evidence and policy references for understanding and promoting enterprise digital transformation, as well as for better selecting the targets of tax incentive policies.
