Tax Cuts and Fee Reductions and Labor Demand of SMEs

Suwei Xiao

doi:10.18282/ff.v9i1.800

Suwei Xiao SichuanÂ University

Ariticle ID: 800

361 Views, 37 PDF Downloads

DOI: https://doi.org/10.18282/ff.v9i1.800

Keywords: Tax Reduction and Fee Reduction, Corporate Comprehensive Tax Burden Rate, Structural Vector Autoregressive Model, SMEs

Abstract

Policies to cut taxes and fees areÂ important means to deal with the economic downturn, whichÂ strongly support toÂ the development of the majority of small and medium-sized enterprises (SMEs). The current study has no consistent conclusionÂ of whether SMEs expand their labor demandÂ because of this. This paper builds a structuralÂ vector autoregressive (VAR) model to analyze the dynamic effects of tax cuts and fee reduction policies on increasing labor demand for SMEs. The empirical results show that tax cuts and fee reductions are important causesÂ of short-term employment fluctuations, but in the long run, it is difficult for taxation policies to have a direct positive effect on employment. Therefore, this article puts forward the ideaÂ that different tax incentives can be formulated for small and medium-sized enterprises in the short termÂ according to their life cycles. In the long run, the focus of macro-control needs to be turned to supply management to achieve the goal of stable employment.

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