Abstract: Under the institutional background of economic transition, how to improve the implementation effect of the Environmental Protection Tax Law is a pressing issue. Based on the panel data of China′s A-share listed companies, this paper used the implementation of the Environmental Protection Tax Law as a quasi-natural experiment and employed the difference-in-differences (DID) method to examine the mechanism of the Environmental Protection Tax Law in promoting enterprise green innovation. The study found that: (1) The Environmental Protection Tax Law promotes corporate green innovation through the pressure mechanism of environmental tax burdens and the incentive mechanism of tax benefits. (2) The pressure and incentive mechanisms of the Environmental Protection Tax Law, as well as the information disclosure and signal transmission mechanisms can effectively help enterprises alleviate financing constraints, indirectly promoting corporate green innovation. (3) Corporate rent-seeking behavior weakens the pressure and incentive effects of the Environmental Protection Tax Law, leading to insufficient innovation motivation and resource misallocation, thereby inhibiting the promotion effect of the Environmental Protection Tax Law on corporate green innovation. (4) Compared with enterprises in the decline stage with resource-constrained and weak innovation ability, the promotion effect of the Environmental Protection Tax Law on green innovation is more significant in the initial stage, growth stage, maturity stage and turbulent stage. These results have not only deepened the understanding of the mechanisms through which the Environmental Protection Tax Law affects corporate green innovation and enrich the empirical evidence of rent-seeking theory in the context of China′s economic transition, but also offered important insights for enhancing the implementation effect of the Environmental Protection Tax Law, curbing corporate rentseeking behavior, and promoting corporate green innovation.

Key words: Environmental Protection Tax Law, green innovation, financial constraint, rent-seeking behavior, difference-in-differences (DID)