Abstract: VAT credit refund is an important measure for building a modern tax system in China, which highlights the profound transformation of the modernization of the national governance system and the governance capabilities. While the VAT credit refund brings policy dividends to enterprises, it also brings about a series of problems in tax collection and management and in tax non-compliance.Based on the relative data of Chinese listed manufacturing companies from 2013 to 2021, this paper empirically analyzes how the VAT credit refunds policy affects corporate tax compliance. The results show that the implementation of the VAT credit refunds policy has effectively stimulated enterprises to improve their tax credit rating, thereby enhancing the degree of their tax compliance. The results of the mechanism analysis show that the VAT credit refunds policy can promote corporate tax compliance by alleviating corporate financing constraints and optimizing corporate governance. Corporate reputation also plays a positive regulatory role. The heterogeneity analysis reveals that the effect of the VAT credit refunds policy in improving corporate tax compliance is more evident in non-state-owned enterprises, that the incentive effect of the policy is more significant in larger scale enterprises under the incentives of the VAT credit refunds policy, and that the higher the degree of marketization of the locations, the greater the disincentive effect of the VAT credit refunds policy on the tax non-compliance of enterprises. Therefore, it is necessary to expandthe scope of the VAT credit refunds policy coverage, to further alleviate corporate financing constraints, to actively cultivate the main market players, and to motivate enterprises to improve their tax compliance with the tax credit ratings.

Key words: VAT credit refunds, corporatetax compliance, financing constraints, corporate governance