The impact of weakening implicit local government guarantees on corporate effective tax burden: Evidence from China

Eliminating implicit local government guarantees (ILGGs) is crucial for regulating government borrowing and preventing local debt risks. As a key tool for structural deleveraging, the weakening of ILGGs has significant policy spillover effects, yet the micro-level transmission pathways remain underexplored. From the perspective of ILGG weakening under central government debt resolution policies, this study examines its impact and mechanism on corporate effective tax burden using a sample of 2,178 listed firms in China from 2015 to 2023, employing an intensity-based Difference-in-Differences approach. The findings reveal that the weakening of ILGGs significantly reduces corporate effective tax burden. Mechanism analysis indicates that this reduction occurs through the channel of enhancing firms' new quality productive forces. Heterogeneity analysis further shows that the reduction effect is stronger for non-state-owned enterprises and firms in competitive industries. This study enriches research on the microeconomic effects of weakening ILGGs and provides novel empirical evidence for alleviating corporate effective tax burden.