24/06/22

INTERNATIONAL TAX: Hungary's global-tax veto seen as 'blackmail'.

As published on euobserver.com, Friday 24 June, 2022.

EU economy commissioner Paolo Gentiloni on Thursday (23 June) urged Hungary to reconsider its opposition to the new minimum global tax, which has blocked the EU implementing the tax deal.

Gentiloni said that despite Hungary's last-minute veto earlier this month over the historic tax agreement, EU countries and the parliament "will not give [in]" on an agreement.

French minister for Europe, Clement Beaune, told MEPs Paris will work until the last moment of its six-month EU presidency (ending in June) to clinch the deal.

"Politically, technically speaking, we were ready to adopt this file, our citizens expect strong measures," the French politician said, adding that he "regrets" Hungary's veto.

The standoff could be raised on Friday (24 June) at the ongoing EU summit — although it is not on the agenda.

Beaune also said his government is ready to scrap unanimity on tax issues in the bloc, to avoid one country blocking an EU move.

Nearly 140 countries reached a two-track deal in October brokered by the Organisation for Economic Cooperation and Development (OECD) on a minimum tax rate of 15 percent on multinationals.

The deal would make it harder for such firms as Amazon, Alphabet's Google, or Meta's Facebook to avoid tax by booking profits in low-tax jurisdictions.

Budapest dropped its unexpected bombshell earlier this month, after the French EU presidency already overcame stiff opposition from Poland.

Hungary argued that the timing of the deal was wrong.

"We don't think it is the right time to think about a global tax," Hungarian justice minister Judit Varga told a group of journalists in Brussels on Wednesday evening.

Asked why Hungary did not oppose the global tax before, since the Ukraine war has now been going on for four months, Varga said that the consequences of the war are only visible now.

"This is not the best time when we have high war-inflation, we have a lot direct and indirect consequences of the sanctions policy, especially in the very high energy prices, tension is building up in European societies," she argued.

Varga also said the measure would work against competitiveness.

"Our position is based on principle, this idea is a bad idea in the time of war. There is a race for investments, including for more optimal taxation," Varga said when asked what would change the Hungarian government's mind.

The Hungarian parliament, two-thirds dominated by MPs loyal to prime minister Viktor Orbán, on Tuesday adopted a resolution opposing the EU directive on the global tax.

However, Gentiloni pointed out that last October all EU member states, including Hungary, unanimously agreed to the OECD deal.

The Italian commissioner said Hungary raised its objection in the last minute, while it had endorsed the agreement at international level, and still supported the EU deal in May.

"The current context of the war, mentioned by Hungary, has affected us all," Gentiloni said, adding that extra tax revenue would help the entire EU economy.

He argued that the 15-percent tax would generate over €140bn annually. "Why to give it up?," Gentiloni asked.

Previously, Poland has raised objections but dropped them as the EU Commission approved Poland's Covid-19 recovery fund, which it held up for a year because of concerns over attacks on the country's judicial independence.

US treasury secretary Janet Yellen also visited Warsaw in May to push for the tax deal's approval.

In Brussels, diplomats and MEPs think Hungary is opposing the tax agreement to put pressure on the EU over its ongoing institutional conflicts.

Hungary's recovery fund has not been approved by the EU Commission because of concerns over systematic corruption.

"It is a negotiating tactic," one EU diplomat commented on Hungary's position.

"When Orbán sees this is working in the case of Poland, you try," the diplomat added.

"Hungary is vetoing this not because of the specific issue of the tax deal itself, but [they] want to flex their political muscles because of the other issues," liberal Irish MEP Billy Kelleher said, whose country was one of the last to sign up to the deal, adding that "Hungary is blackmailing Europe".