[Research Seminar] Accounting: “Dirty Taxes: Corporate taxes and air pollution” M. JACOB – WHU
Speaker: Martin JACOB
Date and Location – Thursday November 23rd 2023 from 14:30 to 16:00
in Paris campus (L712) and on Zoom
In this paper, we examine the role of corporate taxes in air pollution. We use satellite data to measure air pollution through nitrogen dioxide (NO2) levels at a
spatially detailed scale, and we exploit rich local business tax variation in Germany. We find that a 1% increase in business taxes increases NO2 levels by
0.19%. Given the overall declining trend in air pollution in our data, this shows that higher tax rates are an obstacle to the trend towards cleaner air. This increase in pollution can be explained by higher taxes preventing firms from shifting towards cleaner assets. In cross sectional tests, we find that the positive tax NO2 association is stronger when investments are more irreversible, firms are less
flexible to adapt, and local industries are rather dirty. Overall, through higher air pollution, corporate taxes appear to have negative welfare consequences beyond the negative effects on investment and resource allocation.