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France calls for end of national tax vetoes after Hungary scuppers EU deal


France's finance minister Bruno Le Maire. Photo: Benjamin Girette/Bloomberg

France's finance minister Bruno Le Maire. Photo: Benjamin Girette/Bloomberg

France's finance minister Bruno Le Maire. Photo: Benjamin Girette/Bloomberg

French finance minister Bruno Le Maire has called for the end of national vetoes on EU tax laws.

He made the call as Hungary continued to dig in on its last-minute objection to a 15pc minimum tax on large multinationals.

Poland officially lifted its opposition at a meeting of EU finance ministers on Friday.

"As soon as you get one problem sorted out, another comes along,” Mr Le Maire said on Friday.

"On key texts like these, we can’t be relying on unanimity anymore. We need to urgently speed up procedures in the European Union.”

Hungary said it cannot sign up to the deal given the economic turmoil caused by Russia’s war in Ukraine and because of delays to a parallel deal targeting the world’s biggest tech firms.

That deal has hit technical hitches at the Organisation for Economic Cooperation and Development (OECD), which drafted and brokered both agreements last year, with the final text not expected until mid-2023.

A total of 137 countries - including Hungary, Poland and Ireland - signed up to both deals last October, in principle. The EU then tabled a draft law implementing the 15pc rate.

Hungarian finance minister Mihaly Varga said on Friday that the EU should not move ahead given the “major economic and social shock” dealt to the economy by Russia’s war in Ukraine.

“Under such circumstances introducing the global minimum tax at such an early stage would cause serious damage to the European economies,” he said.

He was echoing comments made by foreign minister Peter Szijjarto this week following a call with US secretary of state Antony Blinken.

Mr Szijjarto said the tax would deal a “deep blow” to EU firms as they battle rising costs and interest rates.

A spokesperson for the US State Department told the Irish Independent that the administration expects Hungary to adopt the tax.

“Virtually the entire global economy, including Hungary, agreed to end the race to the bottom on corporate taxation,” the spokesperson said in a statement.

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“We expect Hungary to follow through on its commitment to international tax reforms, including via support for EU implementation of a global minimum tax.”

The US has faced its own delays in agreeing on the tax, as it is part of President Joe Biden’s larger infrastructure bill, which has met with opposition from Democrats and Republicans.

Mr Biden is also seeking to raise the rate of corporate tax on US multinationals’ overseas income to 20pc, well above the 15pc minimum agreed at the OECD.

“We are confident the United States will meet its commitment to enact a tax-compatible regime in 2022. This is a good thing for the United States and for our global partners,” the spokesperson said.

Hungary had previously supported the 15pc company tax, which would be a significant increase on its current rate of 9pc – although it targets only large multinationals with global revenues over €750m a year.

A French compromise text delays the tax until the 2024 budget round and temporarily exempts smaller countries with fewer than 10 qualifying multinationals.

But Hungary wants the second part of the deal - which targets firms with annual revenues over €20bn and profit margins above 10pc - to come into force at the same time.

That part of the deal could cost Ireland up to €2bn a year by 2025, as it will mean firms paying taxes on some of their profits in countries where they make their sales. It would cover the world’s 100 or so largest (mainly tech) firms.

Mr Varga said a delay to that part of the deal – known as ‘Pillar 1’ – will “seriously harm” the overall package.

However, Mr Le Maire said he was “lucidly optimistic” that the Hungarian government would drop its objections in the coming weeks.

Some officials are speculating that Hungary’s opposition to the deal stems from its desire to unlock €7.2bn in EU pandemic recovery money, which is tied to political reforms.

Earlier this month Poland secured the release of €35.4bn in funding from the same pandemic pot, despite an ongoing row with the EU over the independence of its judges.

Brussels was “rather taken aback” at the last-minute change of heart from Hungary, according to a senior EU diplomat.

“Hungary’s arguments are not very convincing for us,” the diplomat said.

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