The effects of tax reforms to address the debt-equity bias on the cost of capital and on effective tax rates


Spengel, Christoph ; Heckemeyer, Jost H. ; Nicolay, Katharina ; Bräutigam, Rainer ; Klar, Oliver ; Stutzenberger, Kathrin



DOI: https://doi.org/10.2778/577384
URL: https://ec.europa.eu/taxation_customs/sites/taxati...
Weitere URL: http://bookshop.europa.eu/is-bin/INTERSHOP.enfinit...
Dokumenttyp: Arbeitspapier
Erscheinungsjahr: 2016
Titel einer Zeitschrift oder einer Reihe: Taxation Papers
Band/Volume: 65
Ort der Veröffentlichung: Luxembourg
Verlag: Office for Official Publ. of the Europ. Communities
ISBN: 978-92-79-62603-6 , 978-92-79-62604-3
ISSN: 1725-7557 , 1725-7565
Sprache der Veröffentlichung: Englisch
Einrichtung: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
Fakultät für Betriebswirtschaftslehre > ABWL u. Betriebswirtschaftliche Steuerlehre II (Spengel 2006-)
Fachgebiet: 330 Wirtschaft
Abstract: Corporate income tax systems usually discriminate between the different sources of finance: They favour debt over equity financing since interest costs are deductible for tax purposes whereas there is no equivalent relief for equity-financed investments. This unequal treatment might cause economic problems such as excessive leverage in the corporate sector and an associated increased vulnerability to economic crises, disadvantages for firms with restricted access to external funds and profit shifting incentives. To achieve an equal treatment of debt and equity financing, either an additional deduction for equity financing could be granted or the current deduction for interest expenses could be disallowed. A disallowance of interest expenses could be achieved by the interest deduction limitation rules which are already employed in several Member States. Other far-reaching, fundamental tax reforms to address the current debt bias are represented by the Comprehensive Business Income Tax (CBIT), Allowance for Corporate Equity (ACE), Allowance for Corporate Capital (ACC) and Cost of Capital Allowance (COCA). The present study provides an in-depth analysis of the effects of these different reform options on effective tax burdens in the EU28 Member States. Moreover, the study gives guidance to which extent current income tax rates at corporate and personal level would have to be adjusted for a revenue neutral implementation of fundamental tax reforms. On the basis of stylised model computations, this study informs about whether different fundamental tax reforms could, in principle, manage to address the debt bias and promote investment, possibly in a revenue neutral way.




Dieser Eintrag ist Teil der Universitätsbibliographie.




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