Tax relief for debt finance helps banks and non-banks, IMF paper finds
There is on average no significant difference in corporate tax bias towards debt finance between banks and non-banks, but size and leverage levels of firms matter, an IMF working paper finds.
Taxation and Corporate Debt: Are Banks any Different? by Jost Heckemeyer and Ruud de Mooij, notes that debt bias reflects a tax distortion for companies to use debt rather than equity to finance investment due to interest payments being deductible for corporate income tax, while equity payments are not.
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