From researchers Wanyi Chen from the SILC Business School at the Shangahi University and Liguang Zhang at the Sichuan Agricultural University here’s the summary-answer to the question ; yes, “..tax uncertainty significantly inhibits corporate innovation, and its influence channels operate mainly through corporate financing constraints and managerial shortsighted behavior.”
That sounds commonsensical, but as they point out whilst work has gone into the effects of lower business tax and the effects of absolute tax rates they believe this study may be a rare analysis of the effects of uncertainty.
Particularly in developing economies where tax regimes are complicated their reduction or removal may be less important than just providing a stable regulatory apparatus.
China is a good example of just such a system where not only are corporate taxes complicated but the provision of special incentives, industry specific taxes, VAT (used in the work as the natural experiment) and other measures that can change over time makes planning especially difficult for business managers.
The work concludes struggling for specific remedial advice urging only that governments do a better job in terms of removing uncertainty and companies pay closer attention to uncertainty planning in their tax affairs.
Overall though the work is a useful point well made. Regulatory uncertainty is the enemy of progress.
Ask a China-tech entrepreneur, or investors in that space, if you need some specifics.
You can access the paper via the following link Tax and Innovation.
Happy Sunday.