Fiscal revenue incentives and local government industrial behavioral choices are informed by the characteristics of local tax systems, which impact local industrial emissions. This study uses data on commodity taxes and industrial emissions in prefecture-level cities in China from 2003 to 2021 to validate the theoretical hypotheses. The results show that (1) there is a significant positive correlation between the proportion of local commodity taxes and industrial emissions; this conclusion is robust. Moreover, under a tax-sharing system, heterogeneity in the emission effects of commodity tax industries can be caused by internal divisions and adjustments in commodity taxes. (2) Transmission channels include expanding the production scale of heavily polluting enterprises and reducing environmental requirements for large taxpayers, and increasing land development. Local areas have been locked into an extensive economic development model, which has increased industrial pollution through dependence on commodity taxes. The study’s research findings contribute to improving the theory of tax-sharing incentives, shows the reactions of enterprises and governments under institutional inertia, and provides policy directions for high-quality economic development and transformation.
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Sun HuiSun YanZhang ShaohuaLiu Ganlin
Oxford Brookes Business School
Year of publication: [in press]Date of RADAR deposit: 2024-04-19