On Wednesday 1 March, MEPs in the Committee on Economic and Monetary Affairs (ECON) examined amendments to the proposed ‘DEBRA’ (‘debt-equity reduction allowance’) directive on a deductible tax incentive for debt. The division between the EPP and Renew Europe groups, which are in favour, and the Greens/EFA and The Left groups persists (see EUROPE 13098/15).
The European Commission’s proposal aims to facilitate access to finance for businesses to become more resilient by introducing a franchise that will give equity the same tax treatment as debt. Thus, increases in a taxpayer’s equity from one tax year to the next will be deductible from the tax base, as is the case for debts.
“We should recognise that if the capital base of companies was stronger, there would be much less need for intervention and public money. This is why six EU countries have already introduced some kind of 'DEBRA' in their national legislation”, argued rapporteur Luděk Niedermayer (EPP, Czech).
“Having applied the same parameters across the EU, we will not only avoid existing possibility for tax optimisation, but we will also send a strong and strong impulse for broadening of the capital market”, he continued.
For Gilles Boyer (Renew Europe, French), “ the diversification of funding sources must not be achieved by limiting access to loans”. He therefore explained that his group had “strong reservations” about a limitation on interest deduction proposed in Article 6, which “risks hindering access to borrowing for businesses and especially for SMEs”.
Both lamented that the ‘DEBRA’ proposal has been put on hold by the EU Council for the time being.
On the other hand, Claude Gruffat (Greens/EFA, French) understands such a decision. “The time has not come to implement measures that favour the capitalisation of companies at the expense of Member States’ cash boxes”, he said. He referred to Belgium’s choice to abolish these incentives. However, he still wants to work on a revised European framework to ensure that these measures benefit the smallest companies in particular.
For José Gusmão (The Left, Portuguese), “the deduction of interest absorption, i.e. interest on loans within the same group of companies, should be limited and, if possible, prohibited”.
Evelyn Regner (S&D, Austrian) supported the aim of rebalancing the type of financing in the EU for business, with a diversified range of funding. However, she proposed limiting the possibility for large companies to deduct interest on debt to 50% instead of the proposed 85%.
To read the amendments tabled: https://aeur.eu/f/5m7 (Original version in French by Anne Damiani)