Interest is tax deductible because debt is used to finance activities that generate income. Just as companies pay salary to employees for benefiting from their skills they pay interest for using creditor's money. I understand your worry which is a serious concern in many developing countries particularly those in Africa where foreign investors finance their operation using large amount of debt and small amount of own capital. As you have stated, by so doing they will end up paying lesser taxes than would have been the case if they used their own money. However, we should not forget the fact that foreign investment is welcomed because, among others, it brings new technology, boosts export earnings of a country(if the investment is on production of export goods), and creates employment opportunities for the locals. Foreign investment becomes even more important particularly when it is made in an area in which locals do not have the financial or technical capability to venture into.

As rational investors, foreign entrepreneurs align their project financing decision with the host country's risk(political and economic) and raise more debt where country risk is high. However, if the value of tax evaded by such companies outweighs the benefit accrued through new technology, governments should design an investment policy by establishing a ceiling for debt financing( for instance 40% maximum). Besides, central banks should exercise their supervisory power requiring banks to diversify their portfolio.

I hope this helps.         

Multinationals are both blessing and a curse of some sought to developing countries. there presence especially coming in with professional skills and new or improved technology help to create gainful employment through boost production for consumption and exports and create employment opportunities and boost the needed revenue to government through taxes. Be that as it may, multinationals coming into developing countries have now a days develop the habit of creating debts to finance the intended projects. These undoubtedly lead to higher risks not by the investors but at the expense of the investing economy. I wish this point i wish to categorically state that there is need to balance the interest of both the investors and the investing public i.e. the host country since both the investor and investee are assumed rational and suppose to work for each others interests. Instances where costs of investments far outweigh benefits should be totally unacceptable hence the need for re-branding and balancing developing country's foreign policy as regards foreign investments (direct and portfolio).

My take please.

Perhaps that could be a good alternative Mr Chukwunedu. However, circumstances often warrant welding the big stick to avoid excessive debts which is the main argurements of this discourse.