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Effects of temporary corporate income tax cuts: Evidence from Vietnam

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  • Pham, Anh

Abstract

Using a quasi-experimental design and panel data from 2004 to 2014, I estimate how temporary 30% corporate income tax cuts affected firm investment, employment, profits, and tax revenue during the Global Financial Crisis in Vietnam. I find that investment increased during the policy year and came back to its pre-policy level after the policy ended. The evidence does not suggest there were any significant changes in employment. Reported profits of eligible foreign-owned firms doubled in the policy year and remained high after the policy ended. I find no evidence that profits of foreign-owned firms increased because of changes in labor or capital. Instead, multinational firms likely shifted reported profits to take advantage of the tax policy. Tax payments by foreign-owned firms increased, while those by domestic firms decreased.

Suggested Citation

  • Pham, Anh, 2020. "Effects of temporary corporate income tax cuts: Evidence from Vietnam," Journal of Development Economics, Elsevier, vol. 146(C).
    • Handle: RePEc:eee:deveco:v:146:y:2020:i:c:s0304387820300511
    DOI: 10.1016/j.jdeveco.2020.102476
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    Cited by:

    1. Wei Cui & Mengying Wei & Weisi Xie & Jing Xing, 2021. "Corporate Tax Cuts for Small Firms: What Do Firms Do?," CESifo Working Paper Series 9389, CESifo.
    2. Li, Hongbin & Meng, Lingsheng, 2022. "Skill biased tax policy change: Labor market effects of China’s VAT reform," Labour Economics, Elsevier, vol. 78(C).
    3. Sacchidananda Mukherjee & Shivani Badola, 2023. "Macroeconomic Implications of Changes in Corporate Tax Rates: A Review," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 56(1), pages 20-41, March.
    4. He, Fan & Zeng, Xin & Xue, Jingwen & Xu, Jianbin, 2024. "The hidden cost of corporate tax cuts: Evidence from worker health in China," China Economic Review, Elsevier, vol. 86(C).
    5. Bryan S. Weber & Toan Luu Duc Huynh, 2022. "COVID‐19 challenges and firm responses: Analysis of a city‐wide census in a developing country," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 2184-2195, September.
    6. Hussain, Adam, 2023. "Effect of Tax Cut on Investment: Evidence from Indian Manufacturing firms," Working Papers 23/390, National Institute of Public Finance and Policy.
    7. Hyeongtae Cho & SungMan Yoon, 2023. "Do Governmental Tax Reliefs for Investment Lead to Investment Efficiency and Sustainability for SMEs? Evidence From South Korea," SAGE Open, , vol. 13(1), pages 21582440231, February.

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    More about this item

    Keywords

    Corporate tax; Profit-shifting; Investment; Development;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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