Hungary rejects US President Joe Biden’s plan to implement a global corporate tax rate since it would raise taxes in the country, Foreign Minister Péter Szijjártó announced last week after meeting with Mathias Cormann, the incoming Secretary General of the Organization for Economic Cooperation and Development (OECD), in Paris.
“Nobody has the right to intervene from abroad in Hungary’s tax policies,” the Minister of Foreign Affairs and Trade told the Hungarian news outlet MTI, insisting that it’s the Hungarian government’s sovereign right to decide tax rates within its own borders.
Despite lacking a consensus, discussions are underway in the OECD to establish a global minimum corporate tax that would place Hungary, which has a corporate tax rate of 9 percent — the lowest in the European Union — at a disadvantage. In the past decade, Hungary and other Central European states have significantly reduced taxes on capital and income so as to make foreign investment as attractive as possible.
According to the US Treasury Secretary Janet Yellen, a global minimum tax levied against corporations would prevent nation states from having to bid against one another in an effort to attract foreign corporations — something which causes countries’ budgets to suffer “tax revenue shortfalls”. Originally, the Biden administration had proposed a 21 percent global corporate tax rate. However, after facing widespread pushback from US lawmakers, as well as certain members of the OECD, the administration has signaled that a 15 percent global minimum tax on multinational companies would be acceptable.
Despite the minor concessions made by Biden administration, however, the Hungarian government remains firmly opposed.
During his comments, Szijjártó also noted that it had become quite clear “over the past decade that raising taxes is a dead-end street”, adding that the “most effective means for creating new jobs and stimulating economic growth are tax cuts”.
Szijjártó, while voicing the Hungarian government’s support for initiatives which seek to settle how tech giants should be tax, also argued that multinationals ought to pay taxes in the countries that they’re operating in.
“We shouldn’t allow tech giants to enjoy an unfair competitive advantage in the absence of international tax regulation,” he said.
The economic response measures put in place by the Hungarian government to mitigate the crisis caused by the global COVID-19 pandemic have been among the most effective in the world, the foreign minister argued, adding that the most effective economic policies for recovery, stability, and sustained growth should emphasize tax cuts, supporting investments, and saving jobs.
“All over the world, we’re seeing the pursuit of policies that are making it harder to reboot the global economy, such as the ones in favor of introducing a global minimum tax,” Szijjártó lamented. ‘
He added that the idea of a global minimum corporate tax goes against the fundamental principles of a market economy, and would unfairly reward countries that have lacked the fiscal discipline that’s required to maintain low tax rates.
We will continue to support “work over welfare”, he said, adding that the Hungarian government planned to maintain its low tax rates.
“We won’t accept any form of international pressure or regulation that would lead to tax increases in Hungary,” the minister declared.