Environmental "Fee-to-Tax" and Heavy Pollution Enterprises to De-Capacity

Will environmental "fee-to-tax", which strengthens the rigidity of levies and increases the environmental costs of heavy pollution enterprises, force heavy pollution enterprises to de-capacity. This paper examines the impact and heterogeneity of the environmental "fee-to-tax" on heavy pollution enterprises' de-capacity by taking the official implementation of the Environmental Protection Tax Law of the People's Republic of China in 2018 as the institutional impact and the listed industrial enterprises in Shanghai and Shenzhen A-shares from 2015 to 2019 as the sample. The study found that environmental "fee-to-tax" pushed heavy pollution enterprises to de-capacity. After parallel trend tests, placebo tests, eliminate policy interference, propensity score matching, and replacement variables, the findings of this paper are robust. Further analysis shows that the effect of environmental "fee-to-tax" on heavy pollution enterprises' de-capacity is more significant in state-owned enterprises, high financing constraints enterprises, and areas with higher tax collection and management; this effect is still effective and more significant in areas with low economic development because all environmental tax revenues are included in local finance. This paper follows up and tests the implementation effect of environmental regulations in China and provides a valuable reference for the government to promote the task of de-capacity and green transformation and upgrading of industrial structure through actively playing the role of environmental protection.