Environmental Protection Tax Law Research Articles

The impact of green tax system on idiosyncratic risk: evidence from China’s environmental protection tax law

ABSTRACT China’s enactment of the Environmental Protection Tax (EPT) Law is a pivotal milestone in the transition towards a green tax system; however, its impact on enterprises capital market performance remains unclear. We adopt a difference-in-differences approach to investigate the influence of green taxation on the idiosyncratic risk of listed companies. The findings reveal a significant reduction in idiosyncratic risk for heavily polluting enterprises following the introduction of the EPT Law, thus suggesting that green taxation contributes to firms’ enhanced capital market performance. This effect acts through environmental, social, and governance performance and is more pronounced for firms with a stronger resource base.

Retraction Note: Green financing and environmental risk mitigation: is environmental protection tax law that important?

Retraction Note: Green financing and environmental risk mitigation: is environmental protection tax law that important?

Environmental protection tax and enterprises’ green technology innovation: Evidence from China

The Environmental Protection Tax Law was officially implemented, marking the initial establishment of China's green tax system. This paper aims to estimate whether the introduction of environmental protection tax will promote enterprises' green technology innovation. Based on data from listed enterprises from 2015 to 2021, this paper takes the implementation of environmental protection tax in 2018 as a quasi-natural experiment, and uses the DID method to evaluate the impact of the implementation of environmental protection tax on the technological innovation ability of enterprises. The results show that, after the implementation of environmental protection tax, the quantity of green patents increased significantly, while the quality of green patents decreased significantly. The analysis of mechanism channel reveals that environmental protection tax policy appears to increase the number of green patents putting regulatory pressure on enterprises and increasing R&D investment, while managerial myopia inhibits the improvement of green patent quality. The changes in the quantity and quality of green patents in large enterprises are more significant. It is also found that the quantity in coastal areas decreased significantly, while the quantity in inland areas markedly increased.

Environmental protection tax law and corporate financial fraud: Evidence from listed firms in China

Taxation constitutes a fundamental element in the administration of a country. The environmental protection tax, an essential green tax system in China, offers enhanced flexibility compared to regulatory measures predicated on administrative orders. It performs a crucial and substantial role in enabling organizations to progress toward superior growth. This research endeavor aims to analyze the impact of green taxation on corporate financial misconduct. Data about China's A-share listed companies from 2011 to 2022 is analyzed to achieve this. A difference-in-differences model is developed by integrating the 2018 Environmental Protection Tax Law implementation into a quasi-natural experiment. Implementing the Environmental Protection Tax Law reduces the quantity and propensity of financial fraud within organizations. The results of the mechanism test suggest that the enforcement of the Environmental Protection Tax Law may hinder the involvement of businesses in financial misconduct through the promotion of information transparency and the strengthening of managerial pressure. The effect of enforcing the Environmental Protection Tax Law on mitigating corporate financial fraud is more significant for organizations that have adopted equity incentives for their CEOs and have greater degrees of digitization, according to a heterogeneity analysis.

Green taxes: Productivity effects of tax-based environmental regulations on heavily polluting firms

Environmental regulations, particularly tax-based measures, significantly impact firm productivity and corporate behavior. This study uses China's Environmental Protection Tax (EPT) law as a quasi-natural experiment to explore whether and how such tax-based environmental regulations influence the productivity of heavily polluting firms. Using a difference-in-differences approach, we find that the EPT law has positively impacted firm productivity by fostering higher research and development investments and encouraging the substitution of labor with capital. The productivity-enhancing effect is more pronounced for state-owned enterprises, large firms, firms with fewer financial constraints, firms receiving more government subsidies, and firms operating in less competitive sectors. These findings support the Porter hypothesis, suggesting that well-designed environmental regulations can stimulate innovation and improve competitiveness, ultimately enhancing productivity. This study underscores the importance of tax-based environmental regulations in promoting productivity and economic growth, providing valuable insights for policymakers aiming to balance environmental protection with economic development.

Designing China's environmental tax schemes from the perspective of differential tax rates

The Environmental Protection Tax Law of the People's Republic of China was promulgated in 2018. However, it is uncertain whether the tax rates defined under the law are reasonable. Environmental tax reform would help the government improve the law's emission reduction effect. This paper aims to design tax schemes from the perspective of differential tax rates and propose environmental tax reform strategies. To support this goal, we adopted a directional distance function, meta-frontier analysis, and an exponential attenuation model to construct a differential tax rate model. Next, starting with the current differential provincial tax rates (scheme B), we proposed three-level differential tax rates, in which the adjusted provincial tax rates (scheme P), differential sector tax rates (scheme S), and differential province–sector tax rates (scheme P–S). Then, we analyzed three new tax schemes and proposed two step-by-step reform strategies. We selected SO2, NOx, and CO2 for empirical analysis. We found that in the short term, the government should prioritize scheme P and set more effective tax rates for SO2 and NOx. In the long term, the government should implement scheme P–S to consider both regional heterogeneity and industrial heterogeneity within a province. Specific measures should set a high tax rate for the light industry category and a low tax rate for energy production and heavy industry category. In addition, we propose that China should include a carbon tax in the scope of its environmental taxes. Our research provides valuable guidance for China's future environmental tax reform.

Research on the path of green technology innovation driven by the Environmental Protection Tax Law: Based on data of heavy polluting enterprises.

Environmental Protection Tax Law (EPTL) is a compulsory environmental regulation measure adopted by China to deal with environmental problems. However, with the advancement of implementation, the EPTL produces a dissimilation effect and damages the realization of the Porter hypothesis effect. The study examines the dissimilation effect of green technology innovation regulated by the EPTL using sample data from heavy pollution firms in China. According to the empirical test results: (1) the coordination between levies and administrations, differential tax rate setting, tax information sharing, definition of the scope of levy and administration, tax declaration counseling, and tax rate level verification produce the dissimilation effect; (2) the Porter hypothesis effect of the EPTL is the most significant in medium-sized enterprises and foreign-funded enterprises. By constructing the research model group of dissimilation effect, this study analyzes the application of environmental regulation in China's social and economic background, thus providing a reference for developing of the green economy.

Environmental protection tax and trade credit: Evidence from China

AbstractThis study investigates how the introduction of China's Environmental Protection Tax Law impacts firms' trade credit taking Chinese A‐share listed companies from 2013 to 2020 as the research sample. Since introducing the Environmental Protection Tax Law, the trade credit of pollution‐intensive firms has increased significantly. Following the mechanism test, the environmental fee‐to‐tax reform forces firms to improve their green innovation level and reduce their risk of environmental violations, which protects the suppliers' interests and increases the willingness of suppliers to provide trade credit for these firms. Further analysis shows that when the firm's market power is relatively higher, the regional judicial environment is better, the regional intensity of tax collection is higher and the effect of environmental fee‐to‐tax reform on the firm's trade credit is strong. Our results contribute to the literature regarding the impact of environmental regulations on firms from the perspective of trade credit, and we provide a new perspective and empirical evidence to support Porter's win‐win hypothesis further.

Strengthening of rule of law and ESG performance of corporations

This study examines the impact of China's 2018 Environmental Protection Tax Law on corporate ESG performance. Using a difference-in-differences approach, the tax reform enhances ESG performance, especially for heavily polluting, state-owned, and large eastern enterprises. Debt financing and institutional investors positively influence this relationship. The research adds to our understanding of ESG factors and guides policymakers and investors.

Environmental protection tax, green innovation, and environmental, social, and governance performance

This study investigates the impact of China's Environmental Protection Tax Law, implemented as a quasi-natural experiment, on the environmental, social, and governance (ESG) performance of listed industrial enterprises from 2012 to 2022. The objective is to gain a better understanding of how this tax influences corporate behavior toward sustainability, addressing a gap in the literature regarding the effect on nonfinancial performance indicators. By employing a dataset of 9077 observations from the Wind and CSMAR databases, we determine whether the tax leads to improved ESG outcomes and fosters green innovation within these enterprises. The findings reveal that the tax significantly enhances the ESG performance of firms, particularly in environmental aspects, by encouraging green innovations. Moreover, the tax's impact is more pronounced in nonstate-owned enterprises than in state-owned ones. These results suggest that similar fiscal policies can effectively drive corporate sustainability; hence, policymakers should leverage economic tools for environmental management.

Research on the Impact of Environmental Protection Tax on Green Technology Innovation of Enterprises

Research on the Impact of Environmental Protection Tax on Green Technology Innovation of Enterprises

Study on the regulatory alienation effect of China's Environmental Protection Tax Law during the strict epidemic control period: based on a sample test of 1000 tax personnel

The enactment of the Environmental Protection Tax Law was a major event in the process of China's economic and social development. This law has achieved certain results in the first two years since enactment, but there have also been many problems. During the three-year strict pandemic control period, the normal process of Environmental Protection Tax Law implementation was impacted, causing alienation and reducing the quality of implementation. This study empirically reveals the alienation mechanism in the implementation of the Environmental Protection Tax Law by taking 1000 Chinese tax professionals, and randomly divides the sample equally into two parts, utilizing 500 samples for the initial test and another 500 samples for the robustness test. This research shows that pollutant emission monitoring (correlation coefficient is 0.07), preferential tax policies (correlation coefficient is 0.03) and the quality of tax personnel (correlation coefficient is 0.06) are not conducive to realizing the crowding-out effect of the Environmental Protection Tax Law, while preferential tax policies (correlation coefficient is 0.05), information-sharing platforms (correlation coefficient is 0.06) and the quality of tax personnel (correlation coefficient is 0.05) hinder the incentive effect, and the remaining elements passed the correlation coefficient test within certain confidence intervals. Therefore, the implementation of China's Environmental Protection Tax Law should be improved in the following ways: the accuracy of the environmental protection departments' supervision of pollutant emissions as well as the scientificity and rationality of preferential tax policies should be improved, the construction of environmental protection tax information-sharing platforms should be strengthened, and compound tax collection and management talent should be created.

Environmental protection tax law and corporate ESG performance

We analyze the bond between environmental protection tax law (EPTL) and corporate environmental, social, and governance (ESG) performance and explore the mediating role of corporate green technological innovation between the two. The study reveals a significant positive correlation between implementing EPTL and corporate ESG performance, with corporate green technological innovation acting as an intermediary. Furthermore, we find heterogeneity in the influence of EPTL on corporate ESG performance, which is primarily concentrated in non-state-owned enterprises. This study's conclusions remain valid after robustness and parallel trend tests.

Impact Study of Environmental Tax Reform Policy on Corporate ESG Performance

The concept of sustainable development is an important issue concerning the national economy and people's livelihood. With the prosperity and development of the economy and society, human beings are increasingly aware of the importance of the ecological environment. This article takes the listed companies on the Shanghai and Shenzhen stock exchanges from 2011 to 2021 as the research sample, using the double difference method to explore the impact of environmental protection tax reform on corporate ESG performance and its mechanism. The study found that the implementation of the “Environmental Protection Tax Law” has a restraining effect on corporate ESG performance. Mechanism analysis reveals that green technology innovation, social welfare expenditures, and the proportion of overseas background executives play an intermediary role in the impact of environmental protection tax reform on corporate ESG performance, with the indirect effect of green technology innovation being the largest. This article provides a new research perspective on the impact of environmental protection tax reform on corporate ESG performance and offers empirical insights for improving environmental tax policies and enhancing corporate ESG performance.

Environmental Protection tax and diversified transition of heavily polluting enterprises: Evidence from a quasi-natural experiment in China

A comprehensive evaluation of the impact of green taxes on enterprises contributes to expediting the economic transition towards environmental sustainability. This study explores the effect of environmental protection tax (EPT) on corporate diversification by leveraging the quasi-natural experiment of EPT law implementation in China. Empirical evidence reveals that, compared to non-heavily polluting enterprises, EPT increases the level of diversification of heavily polluting enterprises by affecting corporate profitability, debt capacity, and risk. Moreover, this facilitative influence is notably pronounced among non-state-owned enterprises (non-SOEs) and enterprises operating within intensely competitive environments. Further analysis shows that diversification helps heavily polluting enterprises shift to green. This transition has benefits for companies in terms of environmental penalties and operational flexibility, which improves firm viability. From the perspective of corporate diversification, this research enhances our understanding of the influence of green taxes, thus providing empirical evidence for evaluating the effectiveness of EPT.

An Empirical Study on the Short-term Impact of the Environmental Protection Fee-to-Tax Reform on Corporate Investment Efficiency

This paper uses non-financial A-share listed companies in China from 2010 to 2020 as research samples, utilizing the quasi-natural experiment conducted through the implementation of the "Environmental Protection Tax Law". The study investigates the short-term impact of the environmental protection fee-to-tax policy on corporate investment efficiency using a generalized difference-in-differences approach. The results indicate that the implementation of the environmental protection fee-to-tax policy significantly suppresses corporate investment efficiency in the short term and increases firms' inefficient investment. Furthermore, it is found that the policy exacerbates the problem of corporate overinvestment, whereas its impact on underinvestment is not significant. After conducting robustness tests by substituting the dependent variables, the conclusion remains valid. Subsequent heterogeneity analysis was conducted, differentiating between state-owned controlling enterprises and non-state-owned controlling enterprises based on the proportion of state capital, compared to state-owned controlling enterprises, the impact of the policy is more significant on non-state-owned controlling enterprises; Additionally, the policy effects across different economic regions of China were analyzed, revealing that the policy's effect is most significant in the eastern region, significant in the western region, but not significant in the central region. The conclusions of this study further enrich the empirical evidence of the micro-effects of environmental regulation, extending the research on the effects of the environmental fee-to-tax policy, and also provide suggestions for policymakers to formulate effective market-incentive-based environmental regulatory policies.

Green tax system and corporate carbon emissions – a quasi-natural experiment based on the environmental protection tax law

The green tax system is an important tool for the government to coordinate the contradiction between economic development and environmental governance using fiscal instruments, and green tax reform can play a regulatory role in carbon emissions. This study analyzes the impact of the green tax system on carbon emissions of industrial enterprises by using the difference-in-differences model based on panel data for A-share listed industrial enterprises from 2014-2021 in China. The results show that: (1) Environmental Protection Tax Law significantly reduces corporate carbon emissions; (2) Among state-owned and heavy polluting industrial enterprises, enterprises with low financing constraints and a high degree of regional marketization, this negative effect is more pronounced; (3) Environmental Protection Tax Law motivates enterprises to implement carbon emission reduction activities through two paths: increased environmental protection investment and improved green innovation, thus promoting the transition to low-carbon development.

The crowding-out effect of the environmental regulation on corporate sustainability

The analysis of the impact of China’s Environmental Protection Tax (EPT) Law on company environmental, social, and corporate governance (ESG) performance is crucial for a more comprehensive understanding of the EPT Law and to improve corporate practices. Using a difference-in-differences (DID) model with a research sample of 7,055 listed firms in China from 2012 to 2020, we found that the EPT Law significantly improved firms’ overall ESG performance. However, this improvement was mainly driven by significant increases in the environmental (E) score. In contrast, the social (S) score declined significantly after the implementation of the EPT Law, indicating a trade-off between environmental regulation and social responsibility. Further analysis also reveals that the increase in production costs, which led to a decrease in employment and wages, is responsible for the crowding-out of social responsibility. This study not only enhances our understanding of the impacts of environmental regulations on companies but also offers guidelines for policymakers to consider the negative externality of policies, which could serve as a “double-edged sword.”

Can environmental protection tax force enterprises to improve green technology innovation?

The introduction of an environmental protection tax enables a smooth shift from the sewerage charge system to the environmental protection tax scheme. This, in turn, promotes a more sustainable development of enterprise growth, emphasizing eco-friendliness. This is of immense importance in advancing environmentally aware practices and sustainability. Based on data collected from A-share listed companies in Shanghai and Shenzhen from 2014 to 2021, this paper investigates the influence of environmental protection taxes on the advancement of green technology and the underlying mechanisms. Taking the execution of the Environmental Protection Tax Law in 2018 as a quasi-natural experiment, a double-difference model is employed to examine the causal relationship between environmental protection taxes and the adoption of green technology by companies. The findings indicate that the introduction of an environmental tax could markedly enhance the extent of green technological innovation within corporations. The evidence arising from the testing mechanism implies that such a tax can encourage firms to boost their investments in research and development, upgrade their innovative human capital, and mitigate financing limitations. The study found that there is heterogeneity in the promotion effect of the environmental protection tax on the green technological innovation of businesses in different regions and provinces with varying tax burdens and types of equity capital. Further research shows that the environmental protection tax has a greater impact on the promotion of utility model patent applications for green technology innovation. This paper presents empirical evidence to support further enhancement of the environmental protection tax system. It recommends designing the environmental protection tax policy with consideration for enterprises and local conditions and bolstering the system's capacity for guiding and stimulating enterprises' green development.

Environmental regulation effect study of the environmental protection tax law during strict epidemic control: based on heavy pollution enterprises sample data test

The implementation of the Environmental Protection Tax Law was seriously affected by strict pandemic control. The Environmental Protection Tax Law imposed environmental taxes on enterprises based on measuring their pollution emissions to restrain their bad environmental behaviour and stimulate their green technological innovation ability. However, during the pandemic control period, the green technological innovation ability of enterprises was not developed. Therefore, it is necessary to optimize the environmental regulation effect of the environmental protection tax. This study is based on sample data covering heavily polluting enterprises in China collected from December 20, 2022, to January 7, 2023. It finds that the follow cost effect existed, but the value compensation effect obviously declined, which leading to a decline in the green technological innovation ability of heavily polluting enterprises. The study shows that although strict pandemic control maintained the environmental protection function of the environmental protection tax, it weakened the economic driving function, which will not only damage the long-term economic development potential but also make the environmental protection function unsustainable.Graphical