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New doubts over corporate tax deal as Hungary rejects 15pc minimum rate

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Hungarian Foreign Minister Péter Szijjártó during his trip to Dublin yesterday. Photo: Frank McGrath

Hungarian Foreign Minister Péter Szijjártó during his trip to Dublin yesterday. Photo: Frank McGrath

Hungarian Foreign Minister Péter Szijjártó during his trip to Dublin yesterday. Photo: Frank McGrath

EU efforts to agree a 15pc minimum tax on large firms have hit another roadblock as Hungary came out against the move this week.

Budapest has taken Warsaw’s place as the last EU holdout after sources said they were confident Poland was ready to come on board.

France has been trying to broker a compromise for months, but it requires the unanimous backing of all 27 EU finance ministers.

Poland opposed the tax until this week, largely to gain political wiggle room on its EU funding and rule of law rows with the bloc.

But now Hungarian foreign minister Peter Szijjarto says he is “not keen” on the tax because it will deal a “deep blow” to European firms as they are struggling to cope with the effects of Russia’s war in Ukraine.

“We’re not keen on this idea at all, especially not in its current form or under the current circumstances,” he wrote on Facebook on Wednesday, after a call with US secretary of state Antony Blinken.

Placing new tax burdens on European companies “could be fatal”, he said, given that Russia’s war in Ukraine has led to “serious challenges” for the European economy.

He said he was against the EU moving ahead of other jurisdictions because “in the rest of the world, who knows when it will be introduced, if at all”.

Brussels was “rather taken aback” at the last-minute change of heart, according to a senior EU diplomat, given Hungary had previously backed the tax, which would increase its 12.5pc rate.

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

“It’s difficult for us to solve the problem if we don’t know what the problem is.”

Last October, almost 140 countries – including Ireland – agreed on the outlines of a 15pc minimum tax and a parallel deal, known as ‘Pillar 1’  that would see the most profitable multinationals pay some taxes in countries where they make their sales.

The 15pc minimum rate covers companies with global annual revenues above €750m, while the ‘Pillar 1’ deal covers a much smaller group of firms with annual revenues of at least €20bn and profit margins above 10pc.

The EU tabled a draft law to implement the 15pc tax last December, which Hungary said in March that it “did not oppose”.

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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.

“I don’t think it’s a good idea to link different files with this one,” Belgian finance minister Vincent van Peteghem told reporters in Luxembourg yesterday. “I think we should take our responsibility.”

An EU finance ministers’ meeting on Friday marks the last chance for France’s Bruno Le Maire to steer a deal through, with the country’s rotating EU presidency set to wind up at the end of the month.

Ministers will also discuss a European Commission bid to use some of the proceeds from the tax deal to fund its own budget.


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