The effect of cleaner and sustainable sewage fee-to-tax on business innovation

Abstract

Can reform of “sewage fee-to-tax” promote corporate technological innovation by internalising environmental cost and strengthening environmental control? The difference between environmental tax and sewage charges were analysed along with summarising the economic consequences of environmental tax. The influence mechanism of the reform of “sewage fee-to-tax” on corporate technological innovation from the dual perspectives of tax and environmental regulation, based on tax theory, Porter hypothesis, and supply and demand theory, were explored. Shanghai and Shenzhen A-share listed companies about 1,150 in the years 2017–2021 are taken as the research sample. The impact of imposing environmental taxes on corporate technological innovation was empirically tested. It is found that imposing an environmental tax stimulates the innovation motivation of enterprises and significantly improves the input and output of corporate technology innovation. This paper has profound implications for perfecting the cleaner sustainable environmental tax system, stimulating corporate innovation, and promoting economic transformation.