Monday, March 27, 2023

France calls for an end to national tax veto after Hungary’s EU deal

France Calls For An End To National Tax Veto After Hungary'S Eu Deal

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

E took the call as Hungary continues to dig into its last-minute objection to a 15pc minimum tax on large multinationals.

Poland officially withdrew its protest at a meeting of EU finance ministers on Friday.

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

“On such key texts, we can no longer rely on unanimity. We need to urgently speed up the processes in the EU.”

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

That deal has hit technical hurdles at the Organization for Economic Co-operation and Development (OECD), which drafted and brokered both agreements last year, with the final text not expected until mid-2023.

A total of 137 countries, including Hungary, Poland and Ireland, signed both deals in principle last October. The European Union then introduced a draft law implementing the 15pc rate.

Hungarian Finance Minister Mihaly Varga said on Friday that the EU should not move forward, given the “major economic and social blow” to the economy from Russia’s war in Ukraine.

“In such circumstances the introduction of the global minimum tax at such an early stage would cause serious damage to European economies,” he said.

He was echoing comments made by Secretary of State Peter Sizzarto this week after a call with US Secretary of State Antony Blinken.

Mr Sizzarto said the tax would deal a “profound blow” to EU firms as they grapple with rising costs and interest rates.

A spokesman for the US State Department told the Irish Independent that the administration expects Hungary to adopt the tax.

“In fact, the entire global economy, including Hungary, has agreed to end the race for corporate taxation,” the spokesman said in a statement.

“We expect Hungary to follow through on its commitment to international tax reforms, including support for the European Union’s implementation of a global minimum tax.”

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

Mr Biden is also calling for an increase in the corporate tax rate on foreign income of US multinationals to 20 per cent, which exceeds the OECD minimum of 15 per cent.

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

Hungary previously supported a 15pc company tax, which would be a significant increase over its current rate of 9pc – although it only targets large multinationals whose global revenues exceed €750m per year.

A French agreement text delays the tax until the budget round of 2024 and temporarily exempts smaller countries with less than 10 qualified multinationals.

But Hungary wants the second part of the deal – which targets firms with annual revenues over €20bn and profit margins in excess of 10pc – to be implemented at the same time.

That part of the deal could cost Ireland up to €2bn a year by 2025, as it would mean that companies pay taxes on some of their profits in the countries where they make their sales. This would include 100 or more (mainly tech) firms in the world.

Mr Varga said a delay in that part of the deal – known as ‘Pillar 1’ – would “severely 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 unlock €7.2bn in EU pandemic recovery money, linked to political reforms.

Earlier this month Poland secured the release of €35.4bn 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 “rather surprised” at the last-minute change of heart from Hungary.

“Hungarian arguments are not very convincing to us,” said the diplomat.

Nation World News Desk
Nation World News Desk
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