There is an inevitable interaction between capital regulations and tax law, and an inherent tension with both sets of regulations when an instrument has both debt and equity characteristics. Debt status brings about tax benefits whereas equity characteristics can see an instrument accepted as loss-absorbing capital from the Reserve Bank’s perspective.
Banks often seek to structure financial instruments to maximise the regulatory capital value of the instrument, while reducing 4/8  BIS central bankers' speeches  their tax liability. In our experience this often leads to complexity in instrument design, greyness around their true loss-absorbing capacity, and high compliance costs.