Rethinking interest treatment and limited liability

My joint column with Ananthanageswaran in Mint on rethinking some of the important rules of the game, on the treatment of interest expenses and the limited liability structure, in the context of the rising global corporate debt burdens.

Update 1 (16.07.2020)

Jonathan Ford is the latest to call for ending the preferential treatment for interest expenses. He points to its cost,

Research by the economist Ruud Mooij at the IMF has estimated that in advanced economies this increases debt ratios by, on average, 7 per cent of total assets, or around 15 per cent of GDP.

Instead of removing the tax relief on debt, Ford advocates extending it to equity too. He points to the example of Belgium which did that in 2005,

The impact was startling: in non-financial corporations, leverage fell as a percentage of total assets from 63 per cent in 1999 to just 42 per cent in 2010.