Does the Reform of Environmental Protection Fee to Tax Help to Improve the Capacity Utilization Rate of Enterprises? Quasi-natural Experimental Evidence from the Implementation of the Environmental Protection Tax Law

Environmental regulation, as an important constraint and incentive mechanism, has become a long-term mechanism to resolve the contradiction of overcapacity of Chinese enterprises at present. Theoretically, environmental tax system, as an important economic incentive environmental regulation, can better play the role of resource allocation in the market, to enhance the utilization rate of enterprise capacity and alleviate the contradiction of enterprise overcapacity. However, China has not had a real environmental tax system for a long time, but has replaced it with an emission fee system. For this reason, China has carried out the reform of environmental protection fee to tax, shifting from emission fee system to environmental tax system. Taking the implementation of the Environmental Protection Tax Law in 2018 as an opportunity, the article explores the impact of the reform of environmental protection fee to tax on the capacity utilization rate of enterprises using the DID method based on the empirical data of A-share listed companies in China’s Shanghai and Shenzhen markets from 2013 to 2019. The main findings of the article are as follows: （1）The reform of environmental protection fee to tax has a significant positive impact on the capacity utilization rate of enterprises, and this positive impact shows a gradual increase over time.（2）The mechanism of the reform lies in enterprises’ investment mechanism and enterprises’ innovation mechanism, i.e., the reform of environmental protection fee to tax can improve enterprises’ capacity utilization rate by inhibiting enterprises’ excessive investment and promoting enterprises’ technological innovation.（3）The positive effect of the reform is more significant among enterprises with poor market system and poor financial system, indicating that the reform of environmental protection fee to tax can compensate for the deficiencies of market system and financial system to better enhance enterprises’ capacity utilization.（4）The reform can significantly improve the short-term performance of enterprises by increasing their capacity utilization rate, but not the long-term performance of enterprises, indicating that the reform of environmental protection fee to tax under the capacity utilization rate path has shown short-term economic effects but not long-term economic effects. Theoretically, the article enriches the theory of environmental regulation to manage enterprises’ overcapacity, expands the study of the economic effects of the reform of environmental protection fee to tax, and explores the boundary role between the reform of environmental protection fee to tax and market system and financial system under the perspective of capacity utilization. Practically, the article provides useful insights for the government to improve the environmental tax system to promote high-quality economic development and for enterprises to optimize their strategic decisions to achieve sustainable development.