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Environmental regulation and corporate tax avoidance: A quasi-natural experiment based on the eleventh Five-Year Plan in China

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  • Geng, Yong
  • Liu, Wei
  • Li, Kai
  • Chen, Hanshu

Abstract

Taking the 11th Five-Year Plan in China as a quasi-natural experiment, this paper explores the impact of environmental regulation on corporate tax avoidance based on firm-level data and the difference-in-difference-in-differences (DDD) method. We find that: (1) Environmental regulation has a significant positive effect on corporate tax avoidance, and several robustness checks confirm our findings; (2) Heterogeneity analysis show that this effects are more significant for private firms and for firms in the regions with less fiscal stress and that in the east part of China; (3) Two channels identified are the operating risks and financing constraints; (4) Further analysis show that the 11th Five-Year Plan has spillover effects on firms in low-emission industries. The increased tax avoidance of firms in high-emission industries contributes to a raised tax burden on firms in low-emission industries. Our study provides implications for the formulation of environmental policies in developing countries

Suggested Citation

  • Geng, Yong & Liu, Wei & Li, Kai & Chen, Hanshu, 2021. "Environmental regulation and corporate tax avoidance: A quasi-natural experiment based on the eleventh Five-Year Plan in China," Energy Economics, Elsevier, vol. 99(C).
    • Handle: RePEc:eee:eneeco:v:99:y:2021:i:c:s0140988321002188
    DOI: 10.1016/j.eneco.2021.105312
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    More about this item

    Keywords

    Environmental regulation; Sustainable development; Corporate tax avoidance; Corporate social responsibility; China;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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