Environmental tax reform and corporate tax avoidance: A quasi-natural experiment on China’s environmental protection tax law

IF 3.8 3区经济学 Q1 BUSINESS, FINANCE

North American Journal of Economics and Finance Pub Date : 2025-01-01 DOI:10.1016/j.najef.2025.102367

Zhongbo Jing , Wei Zhang , Pengcheng Zhao , Yang Zhao

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引用次数: 0

Abstract

The implementation of China’s Environmental Protection Tax Law (EPTL) in 2018 granted local governments the autonomy to adjust local environmental tax rates, raising concerns about potential unintended consequences. This study employs a time-varying difference-in-differences (DID) method to investigate the impact of the EPTL on corporate tax avoidance, utilizing data from China’s A-share listed polluting firms spanning from 2015 to 2021. The findings reveal the following: a) the EPTL substantially intensifies tax avoidance among polluting firms in regions with rising environmental tax rates. The policy’s impact is more significant in firms with pre-existing extensive tax avoidance practices and does not significantly influence innovation inputs and outputs; b) this effect is primarily driven by companies with higher operational risks, political connections, and greater market bargaining power; c) the boosting effect of this policy is influenced by regional features and company characteristics; d) the findings indicate that tax avoidance increases firm value, explaining the motivation behind corporate tax avoidance. This study provides pivotal empirical evidence for assessing the unintended consequences of the EPTL.

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来源期刊

North American Journal of Economics and Finance Multiple-

CiteScore

7.30

自引率

8.30%

发文量

168

期刊介绍： The focus of the North-American Journal of Economics and Finance is on the economics of integration of goods, services, financial markets, at both regional and global levels with the role of economic policy in that process playing an important role. Both theoretical and empirical papers are welcome. Empirical and policy-related papers that rely on data and the experiences of countries outside North America are also welcome. Papers should offer concrete lessons about the ongoing process of globalization, or policy implications about how governments, domestic or international institutions, can improve the coordination of their activities. Empirical analysis should be capable of replication. Authors of accepted papers will be encouraged to supply data and computer programs.