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This paper empirically tests how the change of value added tax impacts on technical efficiency based on the SFA model. The results show, if the proportion of the value added tax is higher, it is not good for the technical efficiency. We suggest, in the design of the VAT system, we should pay more attention to its influence on technical efficiency. For example, implement value added tax subsidy for technology research and development (R&D).

Can VAT improve technical efficiency in China -based on the SFA model test