Combatting debt bias in South African firms: The case for an allowance for corporate equity

Seppo Kari, Londiwe Khoza, Nangamso Manjezi and Kyle McNabb

No wp-2019-10, WIDER Working Paper Series from World Institute for Development Economic Research (UNU-WIDER)

Abstract: The problem of debt bias can be tackled through either disincentivizing the use of debt financing or incentivizing the use of equity financing. Considering the South African context—in which many firms are highly leveraged and the marginal effective tax rates for using debt financing are significantly lower than those for equity financing—this study explores the case for introducing an allowance for corporate equity.

Keywords: Debt bias; Investment incentives; Corporate tax; Tax revenue (search for similar items in EconPapers)
Date: 2019
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