The environmental benefit of tax enforcement: evidence from China

Yu Luo, Ming-ang Zhang and Sihan Zhang

China Economic Journal, 2024, vol. 17, issue 1, 78-96

Abstract: This study explores how tax enforcement contributes to the improvement of air quality. We leverage the implementation of the Golden Tax Project III in China as a quasi-natural experiment and employ a difference-in-differences framework to establish causality. The findings indicate that the average SO2 concentration in pilot cities decreased by 2.8%, and the average PM2.5 concentration decreased by 3.2%. Further analysis reveals that curbing the expansion of tax-evading firms and ensuring the government’s provision of environmental public goods are mechanisms through which stricter tax enforcement reduces air pollution. These effects are more prominent in cities characterized by a higher proportion of heavy-polluting industries, greater fiscal pressure, and a stronger preference for environmental governance.

Date: 2024
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DOI: 10.1080/17538963.2023.2300867

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