Environmental Regulation and Corporate Tax Avoidance: Empirical Evidences Based on the Implementation of the New Environmental Protection Law

Abstract

Abstract: Giving full play to the multi-dimensional supervision effect of the environmental regulation while paying attention to the high-quality economic development and a reasonable and efficient income distribution mechanism are powerful supports to achieve common prosperity.Therefore, in the context of high-quality-developmentorientation and ecological environment priority, this paper analyzes the additive effect of the environmental regulation from the new perspective of tax governance. Based on the quasi-natural experiment research under the background of the implementation of the new Environmental Protection Law in 2015, this paper constructs a double difference model to test the impact of environmental regulation on corporate tax avoidance from the perspective of the political cost hypothesis. The findings show that environmental regulation can significantly inhibit corporate tax avoidance. The results of the mechanism analysis show that environmental regulation legislation has increased the external supervision of enterprises, and the additional effect of this external supervision will increase the political cost of corporate tax avoidance behaviors, thereby curbing the radical tax avoidance decisions made by enterprises. The analysis of the economic consequences reveals that although environmental regulation has increased the tax burden of enterprises, it also leads to the improvement of the corporate information environment and their reputation, which helps to enhance the value of enterprises. Therefore, to promote the construction of the environmental regulation system, we must not only pay attention to the direct effect of environmental regulation on the improvement of the ecological environment, but also actively give play to the tax governance function and other additional effects of environmental regulations, so as to fully release the policy dividends and realize the mutual benefits of environmental protection and economic efficiency.

Key words: environmental regulation, corporate tax avoidance, tax governance, the Environmental Protection Law

CLC Number:

F812.42

SHANG Gui-da, JING Ming-yu, WANG Zhi-wei. Environmental Regulation and Corporate Tax Avoidance: Empirical Evidences Based on the Implementation of the New Environmental Protection Law[J]. Contemporary Finance & Economics, 2023, 0(4): 41-54.

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