12 September 2022

BF position on the DEBRA proposal

The EBF agrees with the over-arching principle of mitigating the tax induced debt-equity bias in corporate investment decisions to render financing more accessible to EU business and to promote the integration of national capital markets into a genuine single market.

 As expressed by the EBF by itself and also in the context of the Markets4Europe campaign which it founded and led prior to the creation of the CMU Action Plan, the European banking sector believes that promoting equity markets for companies seeking risk capital is in the interest of the EU’s competitiveness and also in the long-term interest of the banks, which will stand to gain from greater equity market business as users of equity markets and also as providers of services to companies accessing equity markets.

We are aware that a proposal of this nature may have a net impact on fiscal revenue, which may be one of the considerations for Member States to take into account as they evaluate the different options to achieve the objective of the proposal, which is to promote equity issuance. At the same time, in our view, an EU regime aimed at this objective must also fulfil the following principles:

It must reduce the tax bias in favour of corporate debt by making capital raising more attractive rather than by making corporate debt more costly for the borrowers;

It must treat all equity issuers in the same way, without creating a different category of issuer; and

It must foster a level playing field among issuers from different Member States, in line with both the Banking Union and the Capital Markets Union.

Further reflection is necessary to ascertain the scope of the proposal, in particular to determine which type of equity should be included as well as the time period to apply the mechanism.

 

EBF

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