Study Of The Impact Of Environmental Protection Tax On Enterprise Performance

China’s speedy and high-quality economic development since opening up was accompanied by severe environmental degradation,which has seriously deviated from the concept of Sustainable Development.In recent decades,China has greatly accelerated its pace of environmental legislation.As of now,many environmental protection laws and policies,including the Environmental Protection Tax,have been promulgated,witnessing the continuous transformation of people’s concept of environmental protection legalization during China’s economic development process.In the current era of green development,the demand for environmentally friendly enterprises is unprecedentedly urgent,and our government is also committed to regulating the behavior of society and enterprises from top to bottom through a sound system,indicating the country’s firm determination to balance the relationship between ecological environment and economic growth.With the promotion of the “Emission Fee to Environmental Protection Tax”conversion,the Environmental Protection Tax came into effect on January 1,2018.Taxes can help the country regulate resource allocation at the macro level and also bring some impact to enterprises at the micro level.As an essential part of the social economy,how enterprises can balance environmental protection and economic development in this context requires our focus.This article takes the “Emission Fee to Environmental Protection Tax”conversion as a quasi-natural experiment to establish a DID model.The study takes Chinese A-share listed companies that have paid emission fees or environmental protection taxes from 2015 to 2021 as the initial sample and divides them into the experimental group and the control group by their pollution level.Based on this,it analyzes how the Environmental Protection Tax can impact corporate performance,and then explores the underlying mechanism through the mediating effect model.Then,in further research,the sample companies were grouped by scale,nature of ownership,region,and tax burden to investigate the differences in impact.Finally,a series of robustness tests were conducted,such as parallel trend test,placebo test,PSM-DID,replacement of the dependent variable,and addition of control variables.It helped to reassure the robust causal relationship between Environmental Protection Tax and corporate performance.The main conclusions of this article are:(1)Environmental protection tax can help to improve the performance of heavily polluting enterprises;(2)Enterprise innovation plays a partial mediating effect in the relationship between environmental protection tax and corporate performance,verifying the existence of strong Porter hypothesis in China,which indicates the “innovation compensation effect” under the background of environmental protection tax;(3)Our further research found that for larger,non-state-owned enterprises,enterprises in the eastern region and enterprises in the region with unchanged tax burden,the promotion of environmental protection tax on the performance of heavily polluting enterprises is more significant.This article generalised suggestions at three levels according to the above conclusions.First,the government should improve the tax collection and management departments’ efficiency,vigorously encourage polluting enterprises’ innovation,and improve the tax system according to local conditions and different enterprises;Second,enterprises should actively respond to environmental tax policies,turn pressure into innovation,and offset environmental costs to achieve the improvement of firm performance,and transform into environmentally friendly enterprises;Lastly,Consumers should cultivate a green consumption lifestyle,urge companies to innovate and reduce pollution,and jointly head towards sustainable development.