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Does CBDC launch increase tax collection? empirical evidence from China

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  • Umar, Muhammad

Abstract

This study explores the impact of the introduction of Central Bank Digital Currency (CBDC) on tax collection. Using data from Chinese provinces between 2000 and 2021, it examines how the pilot launch of CBDC has influenced provincial tax revenues. A difference-in-differences estimation method is employed for the analysis. The empirical findings show that the adoption of CBDC in pilot provinces has led to higher tax collection compared to those that did not implement the pilot. A detailed analysis further reveals that this impact is more pronounced in smaller provinces. Furthermore, the CBDC launch has positively impacted on the collection of value-added tax (VAT), corporate income tax, and personal income taxes. These results provide empirical evidence of the CBDC's effect on tax collection and offer important insights for policymakers.

Suggested Citation

  • Umar, Muhammad, 2025. "Does CBDC launch increase tax collection? empirical evidence from China," Finance Research Letters, Elsevier, vol. 71(C).
    • Handle: RePEc:eee:finlet:v:71:y:2025:i:c:s1544612324015150
    DOI: 10.1016/j.frl.2024.106486
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    Keywords

    CBDC; China; Tax collection; CBDC Pilot; Provincial data;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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