Spill-Over Effect of Tax Policy on the Environment: Evidence from Regression Discontinuity Design

Dingwen Wu (), Hongjian Wang (), Haiyan Jiang () and Carl Hsin-Han Shen ()
Additional contact information
Dingwen Wu: Xiamen University
Hongjian Wang: Jiangxi University of Finance and Economics
Haiyan Jiang: Macquarie University
Carl Hsin-Han Shen: Macquarie University

Environmental & Resource Economics, 2025, vol. 88, issue 7, No 5, 1905-1935

Abstract: Abstract This study investigates how the stringent administration of taxes resulting from the Chinese corporate income tax collection reform (the 2002 CITC Reform) affects the intensity of the discharge of pollution by firms. The 2002 CITC Reform, launched on 1 January 2002, required state tax bureaus (STBs) to start collecting income tax from firms incorporated on and after 1 January 2002, while the income tax from firms incorporated before this date is still collected by local tax bureaus (LTBs). Leveraging a Regression Discontinuity Design, we reveal that newly established firms strategically responded to the reform with high levels of wastewater and sulphur dioxide (SO2) emissions. The main finding is robust to a battery of robustness tests. Cross-sectional tests demonstrate that the discontinuity in pollution discharge among the firms whose taxes are managed by STBs is more pronounced among non-state-owned enterprises and firms located in provinces with less strict environmental regulations. Collectively, the findings suggest an unintended spill-over effect of the government’s tax policy on the environment.

Keywords: Corporate income tax; Tax administration; Regression discontinuity design; Quasi-experiment (search for similar items in EconPapers)
JEL-codes: D22 H25 Q52 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s10640-025-00993-z Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:enreec:v:88:y:2025:i:7:d:10.1007_s10640-025-00993-z

Ordering information: This journal article can be ordered from
http://www.springer. ... al/journal/10640/PS2

DOI: 10.1007/s10640-025-00993-z

Access Statistics for this article

Environmental & Resource Economics is currently edited by Ian J. Bateman

More articles in Environmental & Resource Economics from Springer, European Association of Environmental and Resource Economists Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().