The impact of fiscal decentralization on energy intensity has been a long-standing subject of interest and debate. However, to date, there has been a notable absence of studies delving into the effects of fiscal decentralization on energy intensity from the vantage point of tax sharing. This investigation explores the effects of China’s value-added tax (VAT) revenue-sharing reform on energy intensity using prefecture-level city data from 2006 to 2020. Results show a correlation between an increased proportion of VAT revenue sharing and higher regional energy intensity. Heightened competition among local governments amplifies this impact, while environmental regulations and technological innovation mitigate it. Our findings contribute to a more scientifically grounded formulation of the revenue-sharing ratio between central and local governments, aiming to reduce local energy intensity.

Tax revenue sharing reshapes fiscal relations between central and local governments, thereby influencing local fiscal capacity, expenditure behavior, and development strategies, and ultimately playing a pivotal role in urban growth. Yet, little is known about how tax revenue sharing affects urban entrepreneurship. This paper investigates this relationship by exploiting China’s 2016 value-added tax (VAT) revenue-sharing reform as a quasi-natural experiment, applying a difference-in-differences (DID) approach. The findings reveal that an increased local VAT retention ratio significantly promotes urban entrepreneurship, with the effect being more pronounced in non-resource-based cities and eastern regions. Mechanism analysis suggests that the reform fosters entrepreneurship primarily by incentivizing local governments to expand public services and infrastructure investment. Further evidence indicates that the positive effect of tax revenue sharing on entrepreneurship is stronger in regions with higher fiscal self-sufficiency, more intense intergovernmental tax competition, and lower levels of government intervention. JEL Code： H71