Hungarian Parliament rejects global minimum tax with overwhelming majority

A 15 percent global tax would put Hungary at a competitive disadvantage

editor: REMIX NEWS
author: Magyar Hírlap
Erik Bánki, President of Parliament's economics committee. (Magyar Hírlap/Péter Török)

The Hungarian Parliament passed a resolution against the planned European Union directive on a 15 percent global minimum tax on Tuesday with 118 yes votes versus 32 no votes and 8 abstentions.

Erik Bánki (Fidesz), chairman of the economic committee sponsoring the bill, said that the proposal to reject the introduction of a global minimum tax would increase the competitiveness of the Hungarian economy. He recalled that the countries of the Organization for Economic Co-operation and Development (OECD) initially wanted to prevent tax evasion by large technology companies and agreed on a uniform 15 percent tax on tech giants.

At the same time, however, the European Parliament has begun work on a second pillar that would extend the 15 percent tax not only to technology companies but to all multinationals.

A number of issues remain unresolved in this regard, he pointed out. For example, there is no answer to the suggestion that the tax difference should be collected not only by the parent country but also by the country hosting the subsidiary.

Bánki said that until the first pillar is developed, the creation of a European directive is unnecessary, as it will not only not bring European countries a budget surplus, but will also put them at a competitive disadvantage vis-à-vis American or Chinese companies and their mother countries.

In Hungary, the corporate tax burden is 7.5 percent, the politician pointed out, so the global minimum tax would double that. Europe has the lowest corporate tax rate of 9 percent, which encourages large companies not to take their profits out of European countries but to instead tax them here. He also pointed out that the United States also imposes an average tax burden of 7.5 percent on companies.

The first indication that Hungary, which was among the last to agree to the global minimum tax last year, would change its position came last week, when Minister of Foreign Affairs and Trade Péter Szijjártó told his U.S. counterpart Antony Blinken in a phone call.

“The European economy is facing very serious challenges due to the war, and in this situation, the new tax burden on manufacturing companies could be fatal,” the Hungarian foreign minister wrote. “In the rest of the world, who knows when they will introduce it, if at all,” he added.

“Therefore, this decision would be yet another severe blow to European competitiveness, which would be better avoided,” Szijjártó said, revealing that the two sides had agreed to continue discussions this week.

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