The Debt-Equity Bias: consequences and solutions

Serena Fatica (), Thomas Hemmelgarn () and Gaëtan J.A. Nicodème ()
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Serena Fatica: European Commission

No 33, Taxation Papers from Directorate General Taxation and Customs Union, 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.

Keywords: Taxation; Financial sector; Debt; Allowance for Corporate Equity; Comprehensive Business Income Tax; corporate structure. (search for similar items in EconPapers)
JEL-codes: H25 H32 G21 G32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc and nep-pbe
Date: 2012-08
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Persistent link: http://EconPapers.repec.org/RePEc:tax:taxpap:0033

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