Can Tax Cuts Promote Green Innovation? — Based on Empirical Evidence of A-Share Listed Companies in Heavy Pollution Industries

Using the green patent data of A-share listed companies in China’s heavy pollution industry from 2011 to 2020, this paper empirically tests the effect of tax reduction on the green innovation level of enterprises. The findings are as follows: First, tax reduction can significantly improve the level of green innovation. Second, R&D investment is one of the influencing mechanisms of tax reduction to improve the level of green innovation. Third, the incentive effect of tax reduction on the green innovation level of enterprises is more significant in non-state-owned enterprises, and the green innovation level increases by about 3.013% for every 1% reduction in tax burden. Fourthly, after the robustness test, the conclusion of the paper still stands. Finally, this paper puts forward some suggestions on how tax reduction can improve enterprise green innovation.