Assessing the environmental impacts of environmental tax rate and corporate statutory tax rate: Empirical evidence from industry-intensive economies

Abstract

Environmental tax rate (ETR) is an environmental cost charged on enterprises on pollution emissions while corporate statutory tax rate (CTR) is the rate payable by enterprises on net earnings. Both factors have an explicit role in determining the environmental performance. Given that, the current study attempts to explore an appealing nexus between ETR, CTR, and pollution emissions. The empirical analysis was conducted on a sample of 20-years data ranging from 2000 to 2019 of 10 industrialized economies of the world. To check the regression, we employ the generalized least square and strengthen the regression through the system generalized method of moment’s technique. The empirical analysis infers the negative and statistically significant effect of ETR while a positive and statistically significant impact of CTR on pollution emissions. High ETR discourages the pollution-intensive activities of enterprises and limits the pollution volume. However, CTR augments pollution emissions as high CTR impedes the financial capability of enterprises to explore green activities. The important policy layout of the current study is that the ETR can be utilized as a policy tool to abate pollution. The analysis offers the cutting-edge evidence on relevant role of both ETR and CTR in determining pollution emissions even in the presence of other control variables.