Two Birds With One Stone: Digitisation of Tax Administration and the Digital Transformation of Firms

ABSTRACT The digitisation of tax administration is essential for the taxation and digital transformation of firms. This study examines the effect of digitalising tax administration, driven by the third stage of the China Tax Administration Information System pilot, on the digital transformation of enterprises. Using data from Chinese listed companies between 2009 and 2020 and staggered difference‐in‐differences estimates, this study finds that tax revenue management digitisation significantly promotes enterprise digital transformation, alleviates internal and external financing constraints, and encourages investment in research and development and the accumulation of intangible assets. This positive effect is particularly pronounced on private enterprises, small‐scale firms, capital‐intensive businesses, and those facing high financing constraints. Furthermore, as digital transformation advances, the benefits to total factor productivity and industry chain integration become increasingly substantial. These findings underscore the importance of leveraging big data in tax governance to enhance enterprise performance. They also offer strategic insights for policymakers as they focus on improving tax administration efficiency and sustainable development.