Can lower tax rates motivate company innovation?-based on tax shield

• 1、College of Management and Economics, Tianjin University, Tianjin 300072

Abstract：The relationship between tax burden and corporate innovation is a hot issue that academia and industry are concerned about. From the perspective of mutual substitution of non-debt tax shields and debt tax shields, this paper uses China\'s corporate innovation data and financial data from 2007 to 2015 to explore the mechanisms that the impact of reducing tax rates on corporate innovation investment and the different incentive effects of reducing tax rates on development and exploratory innovations. Empirical studies have found that lowering the tax rate in general can motivate companies to increase R&D investment; this incentive effect is affected by the corporate debt tax shield. When the corporate debt tax shield is on a higher degree, lowering the tax rate has no incentive effect; when corporate debt tax shield is on a lower degree, the lower tax rate has a significant effect on the R&D investment; the lower tax rate has greater incentive for exploratory innovation than the incentive for development innovation. This article enriches the research on how tax rate incentive innovation and provides a reference for the formulation of tax incentive policies for differentiated development.

Keywords： tax rate debt shield innovation investment dual innovation