IDEAS home Printed from https://ideas.repec.org/a/bpj/cferev/v12y2023i2p72-93n2.html
   My bibliography  Save this article

Unintended Results: Inter-Provincial Differences in Environmental Protection Tax Rates and Relocation Strategies of Polluting Enterprises

Author

Listed:
  • Xie Zhenfa
  • Chen Fangmin
  • Chen Zhuoheng

    (School of Economics, Xiamen University, Xiamen, China)

Abstract

The Environmental Protection Tax Law that took effect in 2018 gave local authorities a certain amount of discretionary power to set the local rates for environmental protection tax. The inter-provincial gradient tax rates pattern may induce strategic relocation of enterprises, leading to unintended policy results. Combined with the data on trans-regional investment of listed companies, this paper employs the Difference-in-Difference (DID) approach to study the impact of inter-provincially different environmental tax rates on the trans-regional migration of polluting enterprises. The study shows that due to the regional differences in the tax rates, the polluting enterprises opt for the relocation strategy of “avoiding high tax rates and opting for low rates”, setting up more subsidiaries in regions with relatively low tax rates. Further research demonstrates that the trans-regional migration induced by different tax rates can help reduce production costs and increase corporate profits, while dampening the corporate enthusiasm for green innovation in the short term and resulting in pollution transfer. This paper reveals the unintended policy effects that may derive from the environmental tax reform, providing concrete proof for the comprehensive evaluation and understanding of the actual policy effects of existing environmental tax reform.

Suggested Citation

  • Xie Zhenfa & Chen Fangmin & Chen Zhuoheng, 2023. "Unintended Results: Inter-Provincial Differences in Environmental Protection Tax Rates and Relocation Strategies of Polluting Enterprises," China Finance and Economic Review, De Gruyter, vol. 12(2), pages 72-93, September.
    • Handle: RePEc:bpj:cferev:v:12:y:2023:i:2:p:72-93:n:2
    DOI: 10.1515/cfer-2023-0010
    as

    Download full text from publisher

    File URL: https://doi.org/10.1515/cfer-2023-0010
    Download Restriction: no
    File URL: https://libkey.io/10.1515/cfer-2023-0010?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:cferev:v:12:y:2023:i:2:p:72-93:n:2. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.