Abstract: The manufacturing industry is the foundation of the country, the tool for the rise of the country, and the basis for the strengthening of the country; while the tax incentives are key to supporting the high-quality manufacturing development. For this reason, in the context of accelerating the construction of a strong manufacturing country, it is of great practical significance to explore the performance of manufacturing enterprises from the perspective of fiscal and tax incentive policies. Based on the micro data of the listed companies in China’s manufacturing industry from 2010 to 2021, this paper makes an empirical analysis of the effects of the expansion of the “replacing business tax with value-added tax” in the service industry and the reduction of the VAT rate on the business performance of manufacturing enterprises and its functioning mechanism. The results show that the “replacing business tax with value-added tax” in the service industry can improve the business performance of manufacturing enterprises through reducing the VAT burden on them, thereby having an indirect incentive effect on the development of manufacturing enterprises. The downward adjustment of the VAT rate can directly improve the business performance of the manufacturing enterprises, thereby having a direct incentive effect on the development of manufacturing enterprises. At the same time, there are differences in the impact of the expansion of the “replacing business tax with value-added tax” in the service industry and the reduction of the tax rate on the enterprises of different ages and with different ownership properties. Therefore, China should appropriately reduce the tax burden on enterprises and improve the performance of manufacturing enterprises; further improve the value-added tax system and streamline the value-added tax deduction chain; continue to lower the value-added tax rate and fully unleash the vitality of market entities; implement differentiated tax incentives and create a favorable business and investment environment.

Key words: tax incentives, VAT tax liability, manufacturing business performance, expanding “replacing business tax with value-added tax” in the service industry, VAT rate reduction