Tax equity, green innovation and corporate sustainable development

Abstract

In the context of increasing resource scarcity and environmental pollution, achieving sustainable development with environmental friendliness at its core is essential for maintaining long-term economic growth. However, the positive environmental externalities associated with sustainable development impose an additional cost burden on enterprises. Internalizing those positive environmental externalities in the form of corporate benefits through tax policies is the key to incentivizing sustainable development. Using the reform of China’s tax enforcement agency and tax enforcement system as a quasi-natural experimental context, this paper investigates the impact of tax equity on sustainable development. The empirical findings show that tax equity can promote the sustainable development of enterprises, and this promotion is achieved by enhancing corporate green innovation. Furthermore, tax equity has a stronger effect on the sustainable development of enterprises in a favorable market environment because it is more conducive to the protection of intellectual property and transformation of green innovation into tangible output. The tax equities brought about by different types of tax reforms have different effects on the sustainable development of enterprises in different life cycle stages because the types of tax inequities suffered by enterprises of different ages vary.

Environmental Protection Tax and Green Innovation: The Mediating Role of Digitalization and ESG

“…The first-step results of the second step are shown in column (6), and these align with the benchmark regression results. The results of the second and third steps of the ESG's mediation regression model are shown in columns (7) and (9). The coefficients of EPT and ESG performance are significant, indicating that ESG performance has a partial mediating role in the effect of EPT on GI; thus, Hypothesis 3 (H3) is supported.…”

“…Even considering industry-year-province fixed effects and clustering standard errors at the industry-year-province level, the coefficient in column (6) remains significantly positive at the 1% level. However, when considering industry-year-province fixed effects and clustering standard errors at the firm level using the random effects (RE) model, the coefficient in column (7) is no longer significant. The effectiveness of the FE model is verified by an overidentifying restriction test on the RE regression.…”

“…The historical trajectory of environmental regulation in China extends back to 1979, marked by prolonged experimentation with the sewage fee system, culminating in the formal implementation of China's first environmental protection tax (EPT) law in 2018. The shift from a fee-based system to a tax framework consolidates the legal regulatory status of EPT, enhances the efficacy of environmental regulation, and affects the realization of firms' green development objectives [7]. EPT levies a higher proportion of firms with higher pollutant emissions, compelling highly polluting firms to undergo their green transformation.…”

The impact of temperature on labor productivity——evidence from temperature-sensitive enterprises

“…An uncomfortable temperature environment may exacerbate enterprise labor productivity loss by reducing labor intensity in construction activities and the amount of labor available (Carleton and Hsiang, 2016). As climate change poses serious risks to businesses, proactive and appropriate measures are naturally required in response to these risks (Xue et al, 2021;Han et al, 2022;Liu et al, 2022;Wang, 2022). For example, by modifying work hours and work shifts, construction contractors could reduce workers' work time and intensity on high-temperature days in summer and low-temperature days in winter.…”

Can the Top Management Team’s Environmental Attention Promote Corporate Green Innovation?

“…Enterprises in different lifecycles have different resource endowments and development goals, whereby they have different needs for capital and innovation. The measurement of the enterprise lifecycle includes the single factor method (Wang, 2022) [38], aggregative indicator method (Xue and Zhang, 2022) [39], and cash flow model method (Yang and Deng, 2023) [40]. Referring to previous scholars (Dickinson, 2011; Yang and Deng, 2023) [16,40], this study adopts the cash flow model method, which can not only avoid the influence of industry differences but also prevent the subjective judgment of researchers (Ramzan and Lau, 2023) [17].…”