Impacts of tax refund on enterprise’s decisions on recycled materials production: A cross-regional perspective

• Published in: Computers & industrial engineering Vol. 167; p. 108035
• Main Authors: Lingling, He, Hongping, Yuan
• Format: Journal Article
• Language: English
• Published: Elsevier Ltd 01.05.2022
• Subjects: Construction and demolition waste; Cross-regional recycling; Policies; Value-added tax refund; Waste management; Waste management; Construction and demolition waste; Policies; Value-added tax refund; Cross-regional recycling
• ISSN: 0360-8352; 1879-0550
• DOI: 10.1016/j.cie.2022.108035

•We examined a cross-regional management scenario in construction and demolition waste.•We investigated impacts of value-added tax refund on cross-regional recycling decisions.•Under certain conditions, cross-regional production would be better than local production.•Increasing value-added tax refund rate might decrease recycling enterprises’ profits. Recently along with the development of waste recycling markets, a distinct management scenario which extends the traditional municipality-level management scenario to a cross-regional management scenario emerges. Under the cross-regional management scenario, on the one hand, disparities in value-added tax refund policy aggravate imbalanced development of construction and demolition waste recycling markets between regions. On the other hand, how preferential taxation policies would influence decisions of waste recycling enterprises are unclear. To fill the research gap, this paper investigates impacts of value-added tax refund policies on enterprise’s cross-regional recycling decisions by establishing game models that involve two recycling enterprises and two transportation enterprises. Through developing and analyzing game theory based models, the optimal decisions of involved enterprises are obtained. The findings reveal that (i) when the disparities in transportation costs and market capacities between two regions are moderate, recycling enterprises should choose cross-regional production rather than local production; (ii) enlarging market capacities after cross-regional recycling could simultaneously increase recycling quantities of waste in original region. But moderate market capacities and high value-added tax refund rate promote both recycling enterprises being better off in cross-regional production scenario; and (iii) raising value-added tax refund rate is not always necessary under certain conditions, where higher value-added tax refund rate reversely decrease recycling enterprise profits in current region. To enhance the effectiveness of value-added tax refund policy, reducing cross-regional transportation costs and balancing regional market capacities should be applied by the local government. The findings are valuable in expanding the research scope of traditional construction and demolition waste recycling markets and increasing the efficiency of applying tax policies in promoting waste recycling. There are two research limitations; one is that we did not consider the illegal waste dumping (i.e., dumping waste into unauthorized areas) frequently occurring in the process of waste transportation, and the other is that we considered unified preferential taxation for both of the recycling enterprises.