Contemporary Finance & Economics ›› 2026, Vol. 0 ›› Issue (9): 43-55.

• Fiscal and Financial Affairs • Previous Articles     Next Articles

Technology of Tax Enforcement and Tax Manipulation: Evidence from the VAT Input-Output Tax Ratio

Zhang Wenwen1, Dong Shuting2, Han Yan3   

  1. 1. Hubei University of Economics, Wuhan 430205;
    2. Zhongnan University of Economics and Law, Wuhan 430073;
    3. China Appraisal Society, Beijing 100045
  • Received:2026-01-04 Revised:2026-07-31 Online:2026-09-15 Published:2026-09-14

Abstract: How upgrades in the technology of tax enforcement affect corporate VAT declaration behavior is a key question for understanding the governance effects of digital tax enforcement. Employing the phased rollout of Golden Tax III as a quasi-natural experiment, and using data from the National Tax Survey of Enterprises from 2011 to 2019, this paper identifies corporate tax manipulation from the perspective of the VAT input-output tax ratio. The empirical results show that: First, after the implementation of Golden Tax III, the number of firms located to the left of the zero-tax-burden point and suspected of relatively high levels of tax manipulation decreased significantly. Second, from the perspective of firms’ declaration behavior, the upgrade in information technology for tax enforcement reduced the VAT input-output tax ratio of such firms by approximately 1.5% on average, indicating that the room for firms to maintain low tax burdens by adjusting input and output declarations has been compressed, and tax compliance has markedly improved. Third, this governance effect is more pronounced among firms with stronger incentives for tax manipulation, mainly reflected in larger reductions in the input-output ratio for small and medium-sized enterprises, non-state-owned firms, and those with higher pre-existing VAT credit balances. Fourth, further analysis shows that the constraining effect of the tax-enforcement technology upgrade on VAT manipulation is primarily exerted on the input side, with deductible input VAT declining significantly, while no significant change is observed on the output side. This suggests that Golden Tax III mainly compresses firms’ room for manipulation by strengthening the identification of abnormal credits and the verification of upstream-downstream matching. These findings provide new micro-level evidence for understanding how digital tax enforcement reforms reshape corporate tax declaration behavior, and offer empirical support for advancing precision-based regulation and optimizing tax governance in the context of data-driven tax governance.

Key words: tax enforcement, Golden Tax Project III, tax manipulation, VAT

CLC Number: