Can the policy of income taxes merger reduce air pollution emission of enterprises? Evidence from China

• The “Policy of income taxes Merge” is a fair foreign investment policy implemented by china. • The level of air pollution emissions of chinese firms is examined. • A fair tax policy helps to reduce the air pollution emissions of enterprises. • Fair tax policy alleviates corporate financing constraints and improves production efficiency. This study examines how a uniform income tax rate affects Chinese domestic and international firms in 2008. Specifically, it investigates how this tax policy affects these enterprises’ air pollution emissions through a difference-in-differences (DID) model. Data suggest that implementing the Policy of Income Taxes Merger can effectively decrease the pollutant emission intensity of enterprises. This program aims to provide tax benefits to Chinese domestic firms while addressing pollution emissions by alleviating financial limitations and enhancing production efficiency.