Tax Policy and Total Factor Carbon Emission Efficiency: Evidence from China’s VAT Reform

Da Gao, Xinlin Mo, Ruochan Xiong and Zhiliang Huang
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Da Gao: School of Literature, Law and Economics, Wuhan University of Science and Technology, Wuhan 430070, China
Xinlin Mo: School of Economics, Huazhong University of Science and Technology, Wuhan 430074, China
Ruochan Xiong: School of Economics, Huazhong University of Science and Technology, Wuhan 430074, China
Zhiliang Huang: School of Economics, Huazhong University of Science and Technology, Wuhan 430074, China

IJERPH, 2022, vol. 19, issue 15, 1-17

Abstract: China, the world’s largest carbon emitter, urgently needs to improve its carbon emissions efficiency. This study analyzes the impact of tax policy on total factor carbon emission efficiency (TFCEE). Using the Value Added Tax (VAT) reform in China as an exogenous shock and undesirable-SBM model to measure the total factor carbon emission efficiency of 282 cities in China from 2003 to 2019, our multiple difference-in-difference (DID) estimates show that VAT reform significantly improves the TFCEE in the city level. These potential mechanisms show that VAT reform has promoted upgrading industrial structures, stimulated technological innovation, improved human capital, introduced FDI through four channels, and enhanced the TFCEE. The heterogeneity study found that VAT reform has a higher effect on promoting TFCEE in coastal and large megacities than in inland and small and medium-sized cities. This study provides a theoretical basis for policy instruments to improve energy efficiency and the environment.

Keywords: Value Added Tax (VAT) reform; total factor carbon emission efficiency; mechanisms (search for similar items in EconPapers)
JEL-codes: I I1 I3 Q Q5 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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