Abstract: Based on the data of listed companies over 2010—2023,we examine the impact of the merger of State Tax Bureau and Local Tax Bureaus on cross-regional investment from a perspective that combines quantity and quality.We find that the reform produced a structural regulatory effect.While inhibiting total investment volume,the reform squeezed out shell-type and short-sighted investment,corrected private enterprises'tendency toward excessive investment,constrained the expansion of firms with low total factor productivity,and shifted the spatial allocation of capital from policy-driven to efficiency-driven.The reform breaks involution through three ways.(1) Centralize tax discretion to curb the “race to the bottom”.(2) Improve transparency to enhance investment prudence.(3) Lower institutional transaction costs to limit government-firm collusion.This regulatory effect is not only more pronounced in regions with high growth targets,significant fiscal pressures,extensive government intervention,but also in private enterprises,small and medium-sized enterprises,and non-key industry firms.This study provides empirical evidence for how tax reform regulates behavior and dismantles involution,offering insights for further fiscal reform and a unified capital market.