Debt-equity bias reduction allowance (DEBRA) - a BusinessEurope position paper

Key messages

• We welcome the European Commission’s efforts to support equity financing ona more equal footing compared to debt financing, with the aim of increasinginvestment and improving the resilience of the EU economy.
• We support an allowance on corporate equity. By encouraging equity financing,such an allowance can boost investments and economic growth, and providealternative sources of finance to (young and innovative) companies.
• Proposals to make equity financed investments more attractive should not comeat the expense of debt-financed investments. We are at a time of increasedpolitical and economic uncertainty, with interest rates rising and increasinglikelihood of a significant economic downturn. But with significant investmentrequired ahead of the digital and green transition, it is of utmost importance thatEU companies have access to diversified source of financing without having toimplement additional complex tax legislation.We are very concerned that the newinterest limitation rule will make these investments more expensive and harm thecompetitiveness of European companies by introducing a stricter interestdeductibility regime compared to others. Thus, we cannot support the proposeddrafting of the DEBRA directive whilst a new interest deduction limitation measureremains included.