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The Debt-Equity Bias: consequences and solutions

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  • Serena Fatica

    ()
    (European Commission)

  • Thomas Hemmelgarn

    ()
    (European Commission)

  • Gaetan Nicodeme

    ()
    (European Commission)

Abstract

The tax deductibility of interest payments in most corporate income tax systems coupled with no such measure for equity financing creates economic distortions and exacerbates leverage. This paper discusses the consequences of this debt bias and the possible remedies.

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File URL: http://ec.europa.eu/taxation_customs/resources/documents/taxation/gen_info/economic_analysis/tax_papers/taxation_paper_33_en.pdf
File Function: final version, 2012
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Bibliographic Info

Paper provided by Directorate General Taxation and Customs Union, European Commission in its series Taxation Papers with number 33.

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Length: 18 pages
Date of creation: Aug 2012
Date of revision:
Publication status: Published in Reflets et Perspectives de la Vie Economique, 2013, 52(1), pp. 5-18.
Handle: RePEc:tax:taxpap:0033

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Web page: http://ec.europa.eu/taxation_customs/index_en.htm
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Keywords: Taxation; Financial sector; Debt; Allowance for Corporate Equity; Comprehensive Business Income Tax; corporate structure.;

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References

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Cited by:
  1. European Commission, 2013. "Tax reforms in EU Member States - Tax policy challenges for economic growth and fiscal sustainability – 2013 Report," Taxation Papers, Directorate General Taxation and Customs Union, European Commission 38, Directorate General Taxation and Customs Union, European Commission.
  2. Thomas Hemmelgarn & Daniel Teichmann, 2013. "Tax Reforms and the Capital Structure of Banks," Taxation Papers, Directorate General Taxation and Customs Union, European Commission 37, Directorate General Taxation and Customs Union, European Commission.

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  1. European Public Finance (ECON-O-403)

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