Facing or evading? The impact of environmental taxes on the migration of heavily polluting enterprises in China

Na Zhao, Ming Zhao, Han Long () and Liang Yuan ()
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Na Zhao: Xi’an International Studies University
Ming Zhao: Xi’an International Studies University
Han Long: Xi’an Jiaotong University
Liang Yuan: Weinan Normal University

Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, 2025, vol. 27, issue 5, No 75, 11773-11796

Abstract: Abstract The enactment of the Environmental Protection Tax Law has conferred upon Chinese local governments, the discretionary authority to devise local rates for the environmental protection tax (EPT). The EPT difference among provinces may cause strategic migration of enterprises. We investigate the impact of the EPT on the migration of heavily polluting enterprises and assess its economic ramifications through the application of the difference-in-differences-in-differences (DDD) methodology, utilizing data derived from publicly traded Chinese heavily polluting enterprises spanning the period from 2016 to 2020. We find that heavily polluting enterprises with high EPT will set up non-local subsidiaries in areas with low EPT. The influence is more pronounced in the eastern region, with high labor power costs, and for enterprises in highly competitive and large-scale industries. The parent enterprise's output, profit, and strategic innovation activities increase after enterprise migration. This research deepens our understanding of the impact of EPT differences on the relocation of heavily polluting enterprises. Our research provides important policy implications to facilitate legislation and implementation related to environmental taxes. Graphical abstract

Keywords: Environmental protection tax; Enterprise migration; Non-local subsidiaries (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10668-023-04381-9

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