The EU is putting pressure on Hungary to adapt to Ukraine and taxes

A 15 percent minimum tax for multinationals has become entangled in a major row with Hungary over EU grants, the rule of law and aid to Ukraine, delaying decisions on all three.

Mad at a spate of what they called Hungarian political horse-trading, EU finance ministers tried to apply pressure yesterday.

They have officially linked €18 billion in aid to Ukraine and more than €10 billion in frozen grants to Hungary to a corporate tax deal.

European Commission Vice-President Valdis Dombrovskis said it would have been “more constructive and productive to tackle each issue individually”.

But finance ministers hope they have bought themselves some time to try to bring Hungary into line and avoid the issue derailing an EU summit next week.

“I now see it as a package,” said Czech Finance Minister Zbynek Stanjura, who chaired a meeting of all 27 EU finance ministers on Tuesday. “If there is no agreement on everything, then there is no agreement on anything.”

The EU has pledged to bypass Budapest if necessary to ensure Ukraine gets a first tranche of aid in January, with 26 individual countries – rather than the bloc as a whole – acting as guarantors for the commission to raise €18 billion for the markets .

“Ukraine faces a significant funding gap,” Mr Dombrovskis said yesterday. “The situation is extremely difficult. There are millions of people without water, heat, electricity.”

The money will arrive there “on the hook or on the crook”, said Dutch Finance Minister Sigrid Kaag.

However, a tax deal is more complicated as Ireland does not deviate from the unanimity rule.

Finance Minister Paschal Donohoe has repeatedly insisted that the EU should not freeze Hungary. The fear is that the move could set a precedent and jeopardize Ireland’s tax veto in the future.

France, Germany, Italy, Spain and the Netherlands want the EU to move forward as Hungary is the only holdout in the EU. They say Hungary’s resistance has nothing to do with the tax itself.

The French this week pledged to introduce a 15 percent national tax if the Hungarians don’t come on board. But the Dutch finance minister wants to go further.

“Decisions were made earlier,” Ms. Kaag said yesterday. “We signed them, including Hungary. If you fall behind or deviate from your previous signature, the question arises: What do we stand for?

“So here too, if necessary, the 26 too – ideally 27, but the 26 – have to move and act and find ways to move that forward.”

Budapest has vetoed Russia sanctions and placed a last-minute ban on the 15 percent tax deal in June, despite it being approved at the first deal at the Organization for Economic Co-operation and Development in 2021.

But his political maneuvering in Ukraine has infuriated his EU partners. “We have to keep our word,” said Ms. Kaag. “That – in the case of Ukraine and supporting the people of Ukraine in times of war – has to be clear.”

Ministers hope to make a decision around next week 10 pending further assessment of Hungary’s judicial and anti-fraud efforts. The EU is putting pressure on Hungary to adapt to Ukraine and taxes

Fry Electronics Team

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