Crowding-out effect of digitalized tax administration on corporate green innovation: Evidence from China’s Golden Tax Phase IV

Amid the urgent global demand for sustainable development, China’s Golden Tax Phase IV reform has led to a significant "crowding-out effect" on corporate green innovation. This effect manifests in two primary ways: reduced opportunities for tax planning and increased financing pressures on firms. The crowding-out effect is particularly pronounced among companies with lower environmental commitments and those in industries with relatively low pollution levels. By examining Chinese A-share firms from 2018 to 2023, this study demonstrates how digital tax administration, as part of broader macroeconomic policy, influences corporate innovation strategies, particularly in the context of green technology. Using a difference-in-differences (DID) approach, the analysis reveals that the reform has suppressed green innovation primarily by reducing tax avoidance opportunities and tightening financing constraints. These findings contribute to the understanding of the economic impact of digitalized tax systems on long-term corporate investment strategies, particularly in the green innovation sector. The results offer practical insights for refining tax policy to balance compliance with fostering sustainable development and green technologies.