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Jurnal Ekonomi Malaysia

57 (3) 2023 49 – 58

Corporate Income Tax Incentives and R&D Investment in Digital Companies: A New Evidence from China

Faculty of Economics and Management
Universiti Kebangsaan Malaysia
43600 UKM Bangi, Selangor, MALAYSIA.

p112098@siswa.ukm.edu.my

Faculty of Economics and Management
Universiti Kebangsaan Malaysia
43600 UKM Bangi, Selangor, MALAYSIA.

zak1972@ukm.edu.my

Faculty of Economics and Management
Universiti Kebangsaan Malaysia
43600 UKM Bangi, Selangor, MALAYSIA.

rasiahs@ukm.edu.my

Faculty of Economics and Management
Universiti Kebangsaan Malaysia
43600 UKM Bangi, Selangor, MALAYSIA.

hafizhazam@ukm.edu.my

Abstract

The objective of this paper is to investigate the impact of corporate income tax incentives (CITI) on digital companies’ R&D investment. We employ a dynamic panel regression technique on data of 685 digital companies retrieved from the Wind database and the CSMAR Database over 2012 – 2021. The main findings demonstrated that CITI significantly affected the R&D investment of China’s digital enterprises. The data has been divided into three industries, namely computer and electronic equipment manufacturing (CEM), software and information technology services (SIT), and internet and telecommunications broadcasting (ITB). We discovered that the impact of CITI on R&D investment is different, with industry ITB being affected most, followed by industry SIT, and the CEM industry being least affected. For every percentage rise in the actual tax rate, the R&D investment of the three industries is reduced by 0.0435, 0.0237, and 0.0018 percent respectively. This study extends the existing literature on digital economy tax by focusing on the impact of CITI on R&D expenditure in digital enterprises. This paper has reference value for independent innovation and financial optimization of digital enterprises. It is also crucial for the government to change the aspects of tax policy that are incompatible with the growth of the digital economy. According to this study’s policy implications, the government of China should raise tax incentives for businesses engaged in the digital economy to encourage them to invest more in R&D. Besides, they should also make corresponding preferential tax policies according to the industry to which digital enterprises belong, to promote the balanced development of various industries.

Keywords

China; Corporate income tax incentives (CITI); digital companies; digital economy; dynamic panel regression; R&D investment

JEL Codes

H21, H25, O31, O32, O38
http://dx.doi.org/10.17576/JEM-2023-5703-04
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Hui, M., Abdul Karim, Z., Sulaiman, N., & Mohd Azam, A. H. (2023). Corporate Income Tax Incentives and R&D Investment in Digital Companies: A New Evidence from China. Jurnal Ekonomi Malaysia, 57(3), 49–58. http://dx.doi.org/10.17576/JEM-2023-5703-04

@article{hui2023corporate,
  title={Corporate Income Tax Incentives and R&D Investment in Digital Companies: A New Evidence from China},
  author={Hui, Ma and Abdul Karim, Zulkefly and Sulaiman, Noorasiah and Mohd Azam, Abdul Hafizh},
  journal={Jurnal Ekonomi Malaysia},
  volume={57},
  number={3},
  pages={49—58},
 

year={2023},
}

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