Environmental taxes hamper productivity – empirical data proves.
Wang et al ‘23 [Wang, Longke, Ma, Pingping, Song, Yan, Zhang, Ming; School of Economics and Management, China University of Mining and Technology, Xuzhou; 5-13-2023; "How does environmental tax affect enterprises’ total factor productivity? Evidence from the reform of environmental fee-to-tax in China"; Journal of Cleaner Production; https://www-sciencedirect-com.proxy.lib.umich.edu/science/article/pii/S0959652623015998; Accessed 7-2-2023; AT]
China urgently requires to find a solution to the conflict between ecological civilization building and economic growth in the new era, and the introduction of environmental fee-to-tax means that the Chinese government is now highlighting the tasks of pollution control and prevention. To investigate whether this environmental protection policy can simultaneously enhance the natural environment and encourage economic expansion, so as to achieve double dividends, this paper utilized the enactment of China's EPTL in 2018 as a quasi-natural experiment, used Shanghai and Shenzhen A-share listed enterprises from 2012 to 2021 as study samples, and empirically tested the impact of China's environmental fee-to-tax on ETFP by the DDD model. Here are the primary research findings: First, the environmental fee-to-tax suppresses the ETFP [enterprises' total factor productivity] in China, and the findings still dependable with a number of robustness tests. Second, according to the mechanism analysis, environmental fee-to-tax has no obvious effect on the overall degree of technical innovation of enterprises, and the negative impact of the tax mainly originates from the strategic innovation and greenwashing behavior. Although such actions enable enterprises to accept financial support, and then alleviate the pressure of tax burden, they cannot really foster the growth of manufacturing technologies, hinder the improvement of TFP, and are not favorable to the long-term progress. Third, this paper further explores the heterogeneous responses of different firms to the influence of the environmental fee-to-tax. The all samples are grouped at the individual, industrial, and regional levels with the features of the firms. The empirical results show that enterprises with larger size, higher investment efficiency, and state-owned characteristics are more resilient to policy shocks; and there is less negative function on enterprises in industries with fierce competition or in western region with greater financial support.