11/07/22

INTERNATIONAL TAX: Hungary parliament panel reiterates opposition to global minimum tax.

As published on uk.finance.yahoo.com, Monday 11 July, 2022.

Hungary's parliamentary economic affairs panel on Monday reiterated the ruling Fidesz party's opposition to a global minimum tax in a row that has triggered conflict with the United States and put pressure on the forint.

Hungary, already locked in a rule-of-law debate with the European Union that has hampered access to billions of euros worth of recovery money, blocked approval of a global accord on a minimum corporate tax rate last month.

Nationalist Prime Minister Viktor Orban's government has argued that approval of the tax could harm the European economy already reeling from surging inflation and an energy crunch due to the war in Ukraine.

Hungary's move has led to Washington terminating a 1979 tax treaty, which has contributed to pressure on the forint, central Europe's worst-performing currency. It sank to record lows last week despite massive central bank rate hikes.

In a political declaration to parliament called "about the rejection of political pressure against the protection of Hungary's economic interests", the economic affairs panel said a European Parliament motion approved last week put pressure on EU members opposing measures in conflict with their interests.

"Clearly overstepping its authority, the European Parliament would force Hungary to surrender its economic interests," the declaration said, calling on Orban's government to defend Hungary's interests "with all legal means" at EU forums.

Opposition lawmakers criticised the text at a committee meeting on Monday, saying it needlessly heightened political tensions with Western allies when Hungarian markets were shaky.

Some opposition lawmakers have said approval of the document could further undermine Hungary's negotiating position to unlock EU funds to shore up its economy and markets.

"The large current account deficit and further deterioration in global risk sentiment leave Hungary's balance of payments financing at risk, putting further pressures on the HUF and credit in coming quarters," Mai Doan at Bank of America said in a note.

"There are few better alternatives at this stage than agreeing on a deal with the EU on the recovery funds, which would bring investors assurance of additional future inflows."