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… cost of capital in order to enhance their economic position in the international market. Legislators will try to mitigate tax base erosion and enhance the simplicity of the tax system, whilst still improving their business climate in order to attract foreign businesses. The results of implementing a new tax system can for this reason never considered to be perfect, but simply the next best thing. The debt and equity distinction from a Dutch perspective | 8 | It is important to first establish … the group of taxable corporate bodies were drastically expanded. Now, next to the limited liability companies and natural persons, also commendatory corporations, insurance companies and foundations performing economic activities would be taxed. Also foreign established companies conducting business in the Netherlands through their related establishments would be seen as taxable persons. In the original design of the BB 1893, double taxation would be prevented by allowing for a deduction from the … of independent taxation of corporations.’ Based on this view, tax treatment regarding limited liability companies should not take into account the amount of tax payed by its shareholders. Therefore, Secretary Pierson abolished the deduction of 4% in exchange of a great reduction of the tax rate from 4% to 2% (Kamerstukken II, 1892/1893, p. 473-474). This rate would later be amended to 2,5%. 2.2.3. ‘Inkomstenbelasting 1914’ Under the ‘Inkomstenbelasting 1914’ (further: IB 1914), taxation was no …