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Thursday, September 28, 2023

Top EU Nations Proceed with Global Tax Plan Despite Hungary Veto

Hungary’s resistance to the plan has further worsened its shaky relationship with its EU partners, with Budapest and Warsaw steering clear of the bloc’s democratic values

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EUROPE: A near-unanimous decision by four of the top kingpins of the European Union, including France, Germany, Spain and Italy, effectively ends months of effort to implement a tax plan spanning all 27 member states.

Finance Ministers from five of the largest EU economies convened at a meeting on Friday in Prague and deliberated on how alternatives (excluding Hungary) would strengthen their commitment to the plan.

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The 15-per cent minimum tax was one of the two pillars of a major international agreement decided at the OECD and signed henceforth by more than 130 countries, including Hungary and the United States.

Should unanimity not be reached in the next weeks, our governments are fully determined to follow through on our commitment,” the countries said in a joint statement.

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“We stand ready to implement the global minimum effective taxation in 2023 and by any possible legal means,” the countries added.

French Finance Minister Bruno Le Maire lauded the joint initiative and said that “tax justice must be a priority for the European Union”.

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“We will put in place minimum taxation from 2023, either through the European route or through the national route,” said Le Maire.

His German counterpart, Christian Lindner also stressed the relevance and importance of the tax implementation and said that “if necessary”, Germany will adopt the tax “independently of an agreement at the European level”.

Christian Lindner; Photo Credit: Twitter

The EU’s original ambition was that the 27-member bloc would be the first jurisdiction to implement the OECD-brokered agreement. The bloc-wide plan needed the approval vote of all EU countries to pass. Subsequently, the bloc-wide plan required the vote of all EU members to gain complete ratification.

Intense political polarization, and myriad challenges posed by the worsening economic crisis, energy shortage and rising inflation caused by the Ukraine conflict, have severely affected nations, especially those in the EU. These volatile factors have cast a long shadow over the implementation of a broad taxation deal reached last year between more than 130 countries.

Progress on what was hailed as a “revolution” has also been slowed by technical difficulties on new rules determining which nations get to tax multinational digital companies.

Hungary’s last-minute veto in June threatened an already-finalized plan that would create an effective 15% minimum corporate tax.

Hungary’s resistance to the plan has further worsened its shaky relationship with its EU partners, with Budapest and Warsaw steering clear of the bloc’s democratic values.

Lindner remarked, “We strongly support the European approach, we try to convince all member states, especially one, but we make a decision to implement the minimum taxation in Germany if there is no understanding on this.”

“I think others will be open to a similar approach”, he added.

The Hungarian veto of the minimum tax is seen by many in Brussels as a means of pressure to obtain the release of seven billion euros ($7.3 billion) in grants planned under the European pandemic recovery plan.

Poland’s acceptance of the minimum tax came after Brussels accepted Warsaw’s recovery plan, which should see it receive 36 billion euros in grants and loans over the next several years.  

Also Read: Liz Truss Stands by Europe as It Faces a Crucial Energy Crisis


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