Fiscal Reform and the Tax Burden of State-Owned Enterprise in China


  • Yong-Ching Chiou Senior Lecturer Department of Insurance and Finance National Taichung University of Science and Technology Taiwan, R.O.C
  • Yao-Chih Hsieh Yao-Chih Hsieh Associate Professor Department of Public Finance Feng Chia University Taiwan, R.O.C
  • Wenyi Lin Associate Professor Graduate Institute of Financial and Economic Law Feng Chia University Taiwan, R.O.C



Communist party of China, Effective tax rate, Socialist market economy, State-Owned Enterprise.


This study examines the link between state-owned enterprises (SOEs) and effective tax rates (ETRs) in China. Based on a sample of China’s listed companies from 1999-2010, this paper uses the institutional environments, socialist planned commodity economy and socialist market economy, to examine the relationship between ETR and SOE. Our results suggest that SOEs are an important determinant of ETR in China. China’s SOEs pay higher effective tax rates and the results are consistent with the SOE hypothesis developed in this paper based on examination of the China’s context. 


Adhikari, A., Derashid, C., & Zhang, H., (2006). Public policy, political connections, and effective tax rates: Longitudinal evidence from Malaysia. Journal of Accounting and Public Policy, 25(5): 574-595.

Bai, C., Liu, Q., Lu, J., Song, F., & Zhang, J., (2004). Corporate governance and market valuation in China. Journal of Comparative Economics, 32(4): 599−616.

Derashid, C., & Zhang, H., (2003). Effective tax rates and the industrial policy hypothesis: evidence from Malaysia. Journal of International Accounting Auditing and Taxation, 12(1): 45–62.

Gupta, S., & Newberry, K., (1997). Determinants of the variability of corporate effective tax rates: evidence from longitudinal data. Journal of Accounting and Public Policy, 16(1): 1-34.

Hsieh, Y.C., (2013). The heterogeneous relation between firm size and corporate effective tax rates: Evidence from listed companies in China. Journal of Interdisciplinary Mathematics, 16(4&5): 297-308.

Huang, D., Chen, N., & Gao, K., (2013). The tax burden of listed companies in China, Applied Financial Economics, 23(14): 1169-1183.

Kern, B. B., & Morris, M. H., (1992). Taxes and firm size: the effect of tax legislation during the 1980s. Journal of the American Taxation Association, 14(1): 80–96.

Kim, K.A., & Limpaphayom, P., (1998). Tax and firm size in Pacific-Basin emerging economies. Journal of International Accounting Auditing and Taxation, 7(1): l47–63.

Koenker, R., & Bassett, G. (1978). Regression quantiles. Econometrica, 46(1): 33−50.

Koenker, R., & Hallock, K., (2001). Quantile regression. Journal of Economic Perspectives, 15(4): 143−156.

Liu, X., & Cao, S., (2007). Determinants of corporate effective tax rates: evidence from listed companies in China. The Chinese Economy, 40(6): 49–67.

Omer, T. C., Molloy, K. and Ziebart, D., (1993). An investigation of firm size-effective tax reat relation in the 1980s, Journal of Accounting and Finance, 8: 167-181.

Porcano, T. M., (1986). Corporate tax rates: progressive, proportional or regressive. Journal of the American Taxation Association, 7(2): 17–31.

Qi, D., Wu, W., & Zhang, H., (2000). Shareholding structure and corporate performance of partially privatized firms: evidence from listed Chinese companies. Pacific-Basin Finance Journal, 8(5): 587−610.

Shevlin, T., (1987). Taxes and off-balance-sheet financing: Research and development limited partnership. The Accounting Review, 62(3): 480–509.

Shirai, S., (2004). Testing the three rules of equity markets in developing countries: The case of China. World Development, 32(9): 1467−1486.

Siegfried, J. (1974). Effective average U.S. corporation income tax rates. National Tax Journal 27(2): 245-259.

Stickney, C. P., & McGee, V. E., (1982). Effective corporate tax rates: the effect of size, capital intensity, leverage and other factors. Journal of Accounting and Public Policy, 1(2): 125–152.

Sun, Q., & Tong, W., (2003). China share issue privatization: the extent of its success. Journal of Financial Economics, 70(2): 182−222.

Sun, Q., Tong, W., & Tong, J., (2002). How does government ownership affect firm performance? evidence from China's privatization process. Journal of Business, Finance & Accounting, 29(1/2): 1−27.

Tian, L., & Estrin, S., (2008). Retained state shareholding in Chinese PLCs: does government ownership reduce corporate value? Journal of Comparative Economics, 36(1): 74−89.

Wilkie, P. J., & Limberg, S. T., (1990). The relationship between from size and effective tax rate: a reconciliation of Zimmerman (1983) and Porcano (1986). The ournal of American Taxation Association, 11(2): 76–91.

Wu, L., Wang, Y., Lin, B., Li, C., & Chen, S., (2007). Local tax rebates, corporate tax burdens, and firm migration: evidence from China. Journal of Accounting and Public Policy, 26(5): 555-583.

Xu, X., & Wang, Y., (1999). Ownership structure and corporate governance in Chinese stock companies. China Economic Review, 10(1): 75−98.

Zimmerman, J. L., (1983). Taxes and firm size. Journal of Accounting and Economics, 5(2): 119–149.