What is the role of resource tax in sustainable development? A firm-level analysis for China

While previous studies have recognized the importance of resource tax in environmental governance, we know relatively little about whether resource tax can get a win–win both in corporate financial performance (CFP) and corporate environmental performance (CEP). Using China’s resource tax reform (RTR) policy in 2016 as a quasi-natural experiment and adopting a difference-in-differences (DID) strategy, we estimate the real effect of resource tax on CFP and CEP. The results show that RTR increases the financial performance of the regulated firms by 32.26% and the environmental performance by 46.15% compared to the non-regulated firms, indicating that resource tax can promote firms’ sustainable development. Mechanism analysis shows that the effect of resource tax is mainly driven by firms’ technological innovation and productivity improvement. Moreover, we further find that RTR performs better for firms with weaker tax burden-shifting ability and firms located in areas with poorer resource endowments. Overall, our study not only provides evidence for the Porter hypothesis from the perspective of resource tax, but also offers important policy implications for developing countries in their pursuit of sustainable economic and environmental development.