Does government support promote SME tax payments? New evidence from Vietnam

This paper examines whether governments can benefit from their support for firms by increasing firms’ tax compliance. With a panel dataset built from four small and medium-sized enterprise surveys conducted in Vietnam (from 2009 to 2015), we use fixed-effect instrumental variable estimations to empirically test the effect of government support on tax payment. We find that government financial support has a positive effect on total tax payments. Our results reflect the positive effect of government support on firm profitability and innovative activities. This study helps tax authorities to develop more effective strategies for increasing taxpayer compliance.