From fee to tax: Examining the ecological and economic impacts of water tax reform in China

Scientifically evaluating the effectiveness of transforming water resource fees into taxes is essential for improving the green taxation framework. This study utilizes urban water resource data, categorizes reform pilot areas at different stages as treatment groups, and applies a DID approach to identify the ecological and economic effects of the policy. We found that the reform did not significantly affect overall water consumption or efficiency during the observation period. However, it effectively optimized water use patterns and relatively reduced groundwater extraction. Moreover, the reform increased local fiscal revenues through resource tax income without noticeably constraining regional economic growth. Heterogeneity analysis further indicates that the structural optimization effects were more pronounced in Hebei Province. Additionally, the reform had limited impacts on corporate innovation and firm entry–exit dynamics. By offering both theoretical insights and empirical evidence, this study provides meaningful contributions to the ongoing policy debate on water resource tax reform.