LAUSR

Abstract The expanded offerings of unban construction investment bonds (UCIBs) is an important component of the implicit debts of local governments in China. Based on the new statistical scope panel data on UCIBs of prefecture-level cities from 2010 to 2013, this paper constructs a quasi-natural experimental difference-in-difference (DID) model to investigate whether the “replacing business tax with value-added tax” (RBTVAT) policy has stimulated the expansion of UCIBs. The results showed that this policy has promoted the expansion of UCIBs, and such positive influence is more obvious in the eastern economically developed region than that in the central region. The findings add to the recognition that when a country implements a tax policy reform, it should take full account of the possibility that it will increase the financial risk of local governments.