The European Commission recently implemented the minimum tax directive (Pillar 2) to ensure that corporate profits are at least taxed at 15%. At the same time, it proposed a legislative initiative to reduce the tax-induced distortions between debt and equity financing (debt-equity bias reduction allowance directive, DEBRA). Besides these two initiatives, the European Commission announced the “Business in Europe: Framework for Income Taxation” (BEFIT) directive proposal, which is a new attempt to introduce EU-wide harmonised corporate tax base rules. It aims at reducing disparities in tax burdens, complexity in cross-border operations, and opportunities for tax planning within the EU.

In this project, we evaluate how DEBRA, Pillar 2, and their interplay influence the EU Member States’ effective tax levels and, thus, their location attractiveness. Moreover, we investigate the impact of a common tax base as suggested by the BEFIT initiative.