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France is demanding an end to national tax vetoes after Hungary thwarted the EU deal

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French Finance Minister Bruno Le Maire has called for an end to national vetoes on EU tax laws.

We made the call as Hungary deepened its last-minute objection to a 15 percent minimum tax for large multinationals.

Poland officially lifted its opposition at a meeting of EU finance ministers on Friday.

“Once you solve one problem, another comes along,” Mr Le Maire said on Friday.

“With key texts like this, we can no longer rely on unanimity. We urgently need to speed up the procedures in the European Union.”

Hungary said it could not sign the deal amid economic turmoil caused by Russia’s war in Ukraine and delays in a parallel deal targeting the world’s biggest tech companies.

This agreement has encountered technical difficulties at the Organization for Economic Co-operation and Development (OECD), which drafted and brokered both agreements over the past year, with the final text not expected before mid-2023.

A total of 137 countries – including Hungary, Poland and Ireland – signed in principle both agreements last October. The EU then presented a draft law to implement the 15 percent rate.

Hungarian Finance Minister Mihaly Varga said on Friday that the EU should not move forward amid the “major economic and social shock” that Russia’s war in Ukraine has inflicted on the economy.

“Under such circumstances, introducing the global minimum tax at such an early stage would cause serious harm to European economies,” he said.

He echoed Secretary of State Peter Szijjarto’s comments this week after a phone call with US Secretary of State Antony Blinken.

Mr Szijjarto said the tax would deal a “deep blow” to EU companies as they struggle with rising costs and interest rates.

A US State Department spokesman told the Irish Independent the government expects Hungary to implement the tax.

“Virtually the entire global economy, including Hungary, has agreed to end the race to the bottom on corporate taxation,” the spokesman said in a statement.

“We expect Hungary to live up to its commitment to international tax reforms, including by supporting the EU’s implementation of a global minimum tax.”

The US has had its own delays in agreeing on the tax as it is part of President Joe Biden’s larger infrastructure bill, which has met opposition from both Democrats and Republicans.

Mr. Biden is also seeking to raise the corporate tax rate on US multinationals’ foreign income to 20 percent, well above the 15 percent minimum agreed at the OECD.

“We are confident that the United States will meet its commitment to enact a tax-compliant regime in 2022. This is a good thing for the United States and for our global partners,” the spokesman said.

Hungary had previously backed the 15 percent corporate tax, which would be a significant increase from the current 9 percent rate – although it only targets large multinationals with global sales in excess of €750 million a year.

A French compromise text is delaying the tax until the 2024 budget round, temporarily exempting smaller countries with fewer than 10 qualifying multinationals.

But Hungary wants the second part of the deal – which targets companies with annual sales above €20 billion and profit margins above 10 percent – to come into effect at the same time.

This part of the deal could save Ireland up to 2bn by 2025. It would cover the 100 or so largest (mostly technology) companies in the world.

Mr Varga said delaying this part of the deal – known as “Pillar 1” – will “seriously damage” the overall package.

However, Mr Le Maire said he was “clearly optimistic” that the Hungarian government would drop its objections in the coming weeks.

Some officials are speculating that Hungary’s opposition to the deal stems from its desire to free up €7.2 billion in EU money tied to political reforms to help recover from the pandemic.

Earlier this month, Poland secured the release of €35.4 billion in funding from the same pandemic pot, despite an ongoing row with the EU over the independence of its judges.

According to a senior EU diplomat, Brussels was “quite taken aback” by Hungary’s last-minute change of heart.

“Hungary’s arguments are not very convincing for us,” said the diplomat.

https://www.independent.ie/business/personal-finance/tax/france-calls-for-end-of-national-tax-vetoes-after-hungary-scuppers-eu-deal-41763478.html France is demanding an end to national tax vetoes after Hungary thwarted the EU deal

Fry Electronics Team

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