In Shift, Hungary Opposes Minimum Global Tax

"A global deal to introduce a minimum tax rate on company profits hit a fresh roadblock Friday after Hungary vetoed a European Union agreement to implement the measure, which is also stalled in the U.S.

The deal to impose a 15% minimum tax on the profits of large corporations was agreed by 137 countries in 2021, paving the way for the most significant overhaul of international tax rules in a century. 

Governments had hoped to implement the changes next year, but mounting opposition in Europe and the U.S. means that target seems out of reach.

After persuading Poland to drop its opposition to the path to implementation proposed by the EU, Finance Minister Bruno Le Maire of France, who holds the EU's rotating presidency, saw his hopes of clinching a deal dashed by new objections, this time from Hungary, which had endorsed the deal.

"As soon as one problem gets sorted out, another one comes along," said Mr. Le Maire. "We will get there in the end."

The U.S. Treasury said it also expects the EU to unite behind the tax change, which a spokesman said offers "a once-in-a-generation opportunity to end the race to the bottom on corporate taxes, level the playing field for U.S. businesses, and decrease incentives to shift profits and jobs offshore."

The spokesman, Michael Kikukawa, added: "Twenty-six of the 27 countries in the EU already support an EU directive that would implement the agreement, and we are optimistic that Hungary will soon join."

In the U.S., implementation of the minimum tax has been stalled in Congress for months. Securing a global agreement in October took years of negotiations that often seemed close to collapse, but so far there has been little progress on changing national laws to implement the tax.

Poland's change of heart followed a visit by U.S. Treasury Secretary Janet Yellen to Warsaw in May, and more recently agreement by the EU to provide 35.4 billion euros, equivalent to roughly $37.4 billion, in loans and grants to help the country rebound from the pandemic.

Hungary dropped its earlier support for the EU plan, arguing that it would involve tax rises when economic growth is threatened from the higher energy costs following sanctions on Russia. Under the EU proposal, tax changes wouldn't be implemented until 2024.

"Under such circumstances, implementing the global minimum tax would cause serious damage to the European economy," said Mihaly Varga, Hungary's finance minister.” [1]

1.  World News: In Shift, Hungary Opposes Minimum Global Tax
Hannon, Paul. 
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 18 June 2022: A.8.