Based on Porter?s hypothesis and Pollution Shelter?s hypothesis, this paper firstly constructs a mechanism of environmental protection tax law and corporate environmental performance. Secondly, it empirically examines the impact of green tax reform on corporate environmental performance and its internal mechanism through the difference in difference (DID) method. The study findings firstly reveal that environmental protection tax law significantly and progressively promotes the improvement of corporate environmental performance. Secondly, the heterogeneity analysis results show that the promotion effect of environmental protection tax law on corporate environmental performance is significant in enterprises with strong financial constraints and stronger internal transparency. The environmental performance improvement effect of the state-owned enterprises is stronger, which indicates that state-owned enterprises can set an example in the face of the formal implementation of the environmental protection tax law. In addition, the heterogeneity of corporate governance shows that the background of senior executives is an important factor affecting the effect of environmental performance improvement. Thirdly, the mechanism analysis indicates that the environmental protection tax law mainly promotes the improvement of enterprise environmental performance by strengthening the local government?s enforcement rigidity, improving the local government?s environmental concern, promoting enterprise green innovation, and resolving the collusion between government and enterprise. Further analysis shows that the environmental protection tax law based on the empirical results of this paper did not significantly trigger the phenomenon of cross-regional negative pollution transfer of enterprises. The findings of the study have important enlightenment on improving the green governance of enterprises and promoting the high-quality development of national economy.

» Publication Date: 13/03/2023

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