| Real effects of anti-abuse measures in the area of direct taxation– within the EU and in relation to third countries Confederation of Swedish Enterprise / BUSINESSEUROPE’s Fiscal Affairs Group in Brussels Abstract: This paper addresses the use of anti-abuse measures in terms of limiting deductibility of interest payments in the corporate sector. The difference in tax treatment of debt and equity financing, with double taxation of equity financed investments and single taxation of debt financed investments, has encouraged corporate entities to increase their leverage. A number of governments have responded by introducing various measures, like thin capitalisation rules and income earning stripping measures. These measures have however not only affected highly leveraged companies but have also often increased the cost of investments for companies with ordinary financing structures. Governments have often presented these measures as means of protecting the revenue base. It can however be questioned if these measures often do not reduce revenues rather than protect revenues. The European Commission has issued a Communication on how countries may introduce anti-abuse rules without being in conflict with EC law. From these it is clear, that anti-abuse rules can only be targeted on wholly artificial arrangements. Even though some governments have challenged this, it may be in their own interest to implement anti-abuse rules in a very restrictive way in order not to jeopardize their tax revenues. 
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