Abstract:Since tax system was reformed, the environmental pollution caused by the intensification of tax competition among provincial governments had been gradually highlighted. Under this background, this paper theoretically analyzes the relationship of tax competition, environmental expenditure and environmental pollution and puts forward the hypothesis. This paper employs a Spatial Durbin Model (SDM) to investigate the direct effect, indirect effect and total effect of tax competition on PM2.5 pollution. Then the article examines the effects of tax competition on PM2.5 pollution from the perspective of the mediating effect of government environmental expenditure. It's been found that tax competition makes PM2.5 pollution become worse. But the indirect effect and total effect of tax competition on PM2.5 pollution are non-significant. Meanwhile the environmental expenditure has played an important intermediated role in the linkage between tax competition and PM2.5 pollution.