Hungary rejects the proposal for a 15% corporate tax rate

Following the Ecofin meeting last week, the state secretary informed the French media that the nation is still opposed to pillar two's global minimum tax rate.

In a briefing to the French press yesterday, June 23, Hungary's state secretary Zoltán Kovács reiterated the country's decision to oppose the 15 percent global minimum corporation tax.

The decision was made following several days of negotiations, during which the Hungarian government claimed that the tax structure would increase the costs for businesses that produce commodities in Hungary and have an impact on employment.

"The work is not ready," said Finance Minister Mihály Varga, "I think we have to continue the effort to find a solution ."

On June 22, the parliament of Hungary passed a resolution opposing a proposed EU directive that would have increased the corporation tax for large multinationals from 9 to 15%.

With 118 votes in favor, 32 against, and 6 abstentions, the resolution was approved.

In a tweet the day before, on June 21, Kovács stated, "we uphold that every state should have the broadest possible sovereignty in the field of taxation."

The goal of an Ecofin meeting, which was held on June 17 in Luxembourg, was to confirm the support of European nations for the tax agreement. However, Hungary's position caused the EU to take a different course.

One of the most vocal supporters of the tax agreement, Bruno Le Maire, the finance minister of France, expressed his displeasure openly.

Following the news, he declared, "it’s absolutely key that we move from unanimity to qualified majority voting on tax-related issues."

The Hungarian government's veto has undoubtedly put an end to the tax agreement, but politicians, including Clément Beaune, the French minister delegate for Europe, said that France would still fight for the framework's approval.

Beaune expressed regret for Hungary's action but added that the French government was prepared to ignore unanimity to stop Hungary from obstructing the agreement.

But it appears that for the time being, the Hungarian government's stance is unchanged.

In the midst of the uncertainty brought on by the increase in energy prices, rising interest rates, and inflation, government officials claimed that the tax rate would endanger the nation's economy.

Foreign Minister Péter Szijjártó declared that Hungary was "not keen on this idea at all" despite discussions with US Secretary of State Antony Blinken because it is still unknown when non-European jurisdictions will implement the framework.

If the EU states can agree on a rule that does not hurt the Hungarian economy or jeopardize Hungarian jobs, Szijjártó stated that Hungary would be "ready for a compromise."

A global minimum tax would also jeopardize Europe's competitiveness, according to Erik Bánki, chairman of the economic committee of the Hungarian parliament.

If all EU member states approve the European Commission's proposed directive, which was released in December 2021 and would impose a 15 percent minimum tax rate on large multinationals, it would go into effect on January 1 2023.

By fLEXI tEAM