21/06/22

INTERNATIONAL TAX: Hungary’s veto of minimum tax for multinationals "a heavy blow to tax justice", say MEPs.

As published on eutoday.net, Tuesday 21 June, 2022.

EU finance ministers have again failed to reach a consensus on transposing the global deal on a minimum effective tax rate for multinationals into European legislation.

Just after Poland withdrew its longstanding veto, it is now Hungary blocking the agreement.

This marks a third failed attempt to pass this crucial legislation and, say critics, is a heavy blow to tax justice. This also again calls into question the viability of unanimity voting in taxation matters, says the S&D Group.

The group says a minimum effective corporate tax rate of 15%, as agreed on a global level by OECD/G20 countries last October, would yield €48 billion annually in additional, much-needed tax revenues for the EU. More financial resources are needed to cope with the implications of the Russian war against Ukraine, to fund the post-pandemic recovery and to realise the green transition, it says.

Biljana Borzan MEP, S&D vice-president for economic matters (pictured), said:“This is a sad day for the S&D Group. We have spearheaded the European Parliament's push for a minimum effective tax rate and tax justice for years. The EU implementation of this global deal is long overdue. I can only deplore yet another national veto and another lost opportunity for the EU to lead by example.
“The success of the global deal is dependent on the EU and all other signatories effectively implementing the deal, which was agreed in good faith by all member states in the global negotiations in October.”

Aurore Lalucq MEP, S&D spokesperson on taxation and European Parliament rapporteur on the minimum corporate taxation for multinationals, said:“This is a painful and costly failure, a heavy blow to tax justice! No deal means more harmful competition for the lowest tax rate. This ‘beggar-thy-neighbour’ attitude costs the EU up to €190 billion every year. Big multinationals simply have to pay their share.

“This continued blockage, made possible by the right to apply a national veto, is yet another stark reminder that we need to get rid of the unanimity rule at European level when deciding on tax matters.”

In October 2021, 137 countries across the world reached a historic deal to introduce a minimum effective corporate tax rate of 15%, which for the first time curbs tax competition among countries across the world.

This is about the effective tax rate - the tax that is actually paid by the company, after taking into account all possible benefits or exemptions.

This global agreement, concluded under the OECD/G20 framework, now needs to be translated into the European law and into the legislative frameworks of all other signatories. Today’s failure means there is still no deal on its transposition into EU legislation.