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Tax Burden, Innovation Ability and Enterprise Upgrading—Empirical Evidence from NEEQ Listed Companies
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TitleTax Burden, Innovation Ability and Enterprise Upgrading—Empirical Evidence from NEEQ Listed Companies  
AuthorLi Linmu and Wang Chong  
OrganizationNanjing University of Finance and Economics; Shanghai University of Finance and Economics; 
Key WordsTax Burden; Direct Taxes; Indirect Taxes; Innovation Ability; Enterprise Upgrading 
AbstractThis paper examines the influence of firms’ tax burden on their innovation ability and upgrading level, using the data from the annual report of NEEQ listed companies from 2005 to 2015. The empirical results show that both the overall and direct or indirect tax burden are significantly negatively related to firms innovation ability and output, but the negative effect of indirect taxes is greater than direct taxes. On the other hand, although the overall and the indirect tax burden are also significantly negatively related to business growth, direct tax burden is found significantly positively related to it. Further study reveals that it is innovation (R&D) ability that results in different impacts of different types of tax burden on enterprise upgrading. In the short term the increase of enterprise R&D input lowers not only its direct tax burden but also its growth indices such as real return on equity and operating profit ratio, which consequently makes direct tax burden positively related to enterprise growth. Meanwhile with the increase of innovation output and operating receipt, indirect taxes based on sales proceeds will increase. Therefore, further reduction of tax burden related to enterprise innovation activities in the long run is beneficial not only to enterprise upgrading, but also to sustainable growth of tax revenue. 
Serial NumberWP1330 
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