Hungary Blocks Biden’s Global Tax Plan In European Union

Sunday, June 19, 2022 | Tag Cloud Tags: , , , ,

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By Stefan J. Bos, Chief International Correspondent reporting from Budapest,

BUDAPEST (Worthy News) – Hungary has blocked the introduction of U.S. President ’s proposed global minimum corporate of 15 percent in the European Union. The member state says the Biden tax would undermine its competitive edge in the region as Hungary has the bloc’s lowest corporate tax rate of just 9 percent.

An EU agreement was expected on Friday after Poland dropped its opposition. But Hungary emerged as a last-minute hurdle and prevented the deal that required the backing of all 27 EU states. “Hungary cannot support the adoption of the global minimum tax directive at this stage,” Finance Minister Mihály Varga told his European counterparts in a public session of an “Ecofin” meeting. He added: “The work is not ready. I think we have to continue the effort to find a solution.”

Earlier, Hungarian Foreign Minister Péter Szijjártó warned that the Biden tax would be harmful and threaten jobs. “International pressure to introduce a global minimum tax in Europe as early as the start of next year is growing. We consider this extremely dangerous,” he argued. The minister expressed surprise about the timing of the tax plan, noting the ongoing Russian invasion of Ukraine while the European economy faces sky-high energy prices, rising interest rates, and inflation, as well as supply chain disruptions.

“Increasing the tax burdens of European companies would cause serious problems, especially given that the global minimum tax would only be introduced in Europe,” the minister stressed. “The minimum tax would put European businesses at a serious competitive disadvantage against their global rivals,” Szijjártó warned.

“But of course, central Europe would be hit hardest of all,” he said. “Thanks to disciplined fiscal policies, central Europe has the lowest corporate and payroll taxes, which would see a drastic increase if the global minimum tax were to be introduced. The key to Hungary’s economic success is that it has continually cut taxes in recent years, ” Szijjártó stressed. He explained that “tax increases would hurt the economy” and threaten jobs. “We cannot support such a proposal,” Szijjártó said.

Szijjártó said he told U.S. Secretary Anthony Blinken: “We’re not keen on this idea at all, especially not in its current form or under the current circumstances.”

UKRAINE WAR

The war in Ukraine is putting the European economy under strain, and new taxes on producers could prove fatal as “efforts are underway to introduce them in Europe at the start of next year, while who knows when they’ll be introduced in the rest of the world, if at all,” he added. Szijjártó said he agreed with Blinken to hold further consultations.

The standoff comes as Brussels has also expressed anger over Hungary’s plan to veto a proposed Russian natural gas boycott. It earlier inked an oil embargo under the condition that it would continue to receive Russian supplies through pipelines.

Hungary heavily depends on Russian energy, with Hungarian Prime Minister Viktor Orbán saying supporting a total Russian energy boycott would be a “nuclear bomb on the Hungarian economy.” His country’s tough stance on Biden’s tax was welcomed by the Americans for Tax Reform advocacy group. “Hungary is wise to reject the global minimum tax proposal that would significantly damage the valuable tax competition among countries and would cause undue harm to businesses, workers, and economies around the world, argued its president, Grover Norquist.

He said a global minimum tax “would be particularly detrimental to countries such as Ireland, Bulgaria, and Hungary that currently keep their corporate tax rates at lower, more competitive rates. A global minimum tax also threatens poorer, developing countries that need to maintain high growth rates to be lifted out of poverty. Cutting corporate tax rates increases investment, productivity, economic growth, output and ultimately higher standards of living.”

Norquist called the global tax agreement “very dangerous” as it increased the tax burden on U.S. and European manufacturers already facing Ukraine’s war with significant challenges to Western economies. U.S. Republican lawmakers have in recent months argued that they too believe the Biden administration should revisit aspects of the global deal, which they claim will disadvantage U.S. multinationals.

Deloitte United States, one of the world’s leading auditing firms, suggested Hungary’s veto during the June 17 European Union vote may further undermine the implementation of Biden’s tax plan. “Although more than 140 countries signed on to the agreement in October 2021, these lawmakers have said they believe there is still time to change course because the implementation timeline is already slipping. The June 17 EU vote will likely strengthen that position in Republicans’ eyes,” Deloitte United States said in an assessment.

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