Income Tax and Salesforce Performance: A Micro Perspective

How does the change in income tax affect sales performance? Our paper explores the link between economic policy and salesforce management at the transactional level, using data from a large fashion retailer in China. The analysis shows that the implementation of a nationwide personal income tax cut in October 2018 improves sales performance more among those salespersons who benefited from the policy, compare to others. The performance gain is observed after the tax cut and persisted in future months, and is particularly significant in low-income regions. We also find that the performance gain is largely due to an increase in sales of pricier items, rather than more reliance on discounts. Finally, the research shows that the net effect of the tax cut is an increase in the government’s revenue due to the firm’s higher sales and corresponding increase in corporate tax paid.