European Family Businesses - Families in Business for the long term

Strengthening Equity

Situation

Europe needs to bring back the idea that not all business is managed with the intent to sell. But that businesses can be owned with the intent to build something sustainable, something that can hold for generations - such as family businesses. EFB is of the belief that this can be done quite easily, by creating a level playing field for equity as a source of company funding.

Equity finance is key to strong and business growth. Until recently, National and European policy makers have overlooked this fundamental form of capital. Equity finance is key to strong business growth. Importantly, equity is also key to accessing another form of vital financing, debt.

Fiscal systems in Europe tend to favour debt over equity, creating incentives for higher leverage for firms. Therefore, it is essential that the framework conditions in Europe, strengthen the equity positions of companies. Whilst facilitating the responsible use and access of debt is crucial for businesses, equity financing should benefit from the same fiscal treatment as debt.

This would lead to stronger capitalization of businesses with equity in the real economy and hence provide more capacity for sustainable long term investments and job creation.

EFB Calls for

  • Equity should benefit from the same fiscal treatment as Debt
  • Policy makers should consider the Total Efficient Tax Rate when formulating fiscal policy
  • The introduction of Allowance for Corporate Equity to help provide more capacity for long term investments and job creation

Read ourĀ Policy Papers & Studies