At the time, this was considered a major breakthrough.

Last October, in a measure coordinated by the Organization for Economic Co-operation and Development (OECD), 136 countries and jurisdictions around the world agreed to set a minimum global corporate tax rate of 15%..

Even a number of countries that previously opposed the idea have come around to it, especially Irelandwhose 12.5% ​​corporate tax rate is credited with attracting billions of euros worth of business to the country.

However, some reservations remain. Among the most notable is Hungary, where the prime minister is today Viktor OrbanThe ruling Fidesz party has again announced its opposition.

The economic panel of the Hungarian parliament, a body dominated by FIDES members, issued a statement saying it rejected “political pressure against the protection of Hungary’s economic interests.”

Hungary’s opposition to the tax, however, threatens to derail the whole affair.

He has already delayed a vote in the European Parliament that would have made the minimum tax rate part of EU law while raising tensions between Hungary and the EU in a way that resembles some opposition to Hungary. EU, which has been seen in the UK Parliament in recent decades Brexit.

Hungary does not like the idea because it believes it will make its economy and its businesses less competitive. The country currently has a corporate tax rate of 9%, and it says it should be free to keep it if it wants to.

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The EU retaliated by threatening to delay payment of up to €15 billion (£12.7 billion) in recovery funds to Budapest, while the row also promises to reignite debate in the European Parliament over whether individual countries should continue to exercise a veto on taxation, which currently must be unanimously adopted by all 27 member states.

A number of MEPs have already argued that if Hungary continues its opposition, alternatives to the national veto on tax matters should be reconsidered – including the possible use of “enhanced cooperation”, a euphemism for majority voting.

There are also signs that some EU governments are coming around to this view.

“Europe can no longer be a hostage to the ill will of some members”

Bruno Le Maire, France’s finance minister, said earlier this month: “This global minimum tax will be introduced in the coming months with or without Hungary’s consent.

“Europe can no longer be a hostage to the ill will of some of its members.”

Hungary’s move has soured relations with other EU member states as it comes just weeks after it threatened to end EU sanctions against Russia over its war in Ukraine.

The country’s insistence on continuing to receive Russian oil and its decision not to participate in arms shipments by NATO members to Ukraine has caused much discontent across the bloc – as has its reluctance to impose sanctions against Vladimir Putin and his supporters and members of the regime.

US cancels tax treaty with Hungary – “benefits are no longer reciprocal”

But now Hungary has an additional problem – because the US has entered the fray. The Biden administration announced over the weekend that it was ending the more than four-decade-old tax treaty with Hungary.

The agreement, signed in 1979, aims to relieve residents of the two countries from the risk of paying taxes on the same income from both countries.

A U.S. Treasury spokesman said that Hungary’s corporate tax rate is now half the U.S. rate of 21%, a 1979 treaty that unilaterally benefited Hungary, adding, “The benefits are no longer mutual — with a significant loss of potential revenue for the United States and little in exchange for American business and investment in Hungary.

“Hungary has exacerbated the US government’s long-standing concerns with the 1979 tax treaty by blocking an EU directive to impose a global minimum tax.

“If Hungary had introduced a global minimum tax, this agreement would have been less one-sided. Failure to do so could impair Hungary’s status as a contracting jurisdiction, further disadvantaging the United States.”

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Budapest reacted grumpily to this move.

Peter Sijarta, the foreign minister, said in a Facebook post: “Based on all this – no matter how strong the pressure is on us – we clearly do not support the introduction of a global minimum tax in Europe. And we continue our professional activity of consulting on on tax issues with our republican friends.”

This was in reference to some Republicans in the US Congress writing to Hungary’s ambassador to the US to offer support.

However, Hungary’s currency, the forint, fell nearly 2% against the dollar on the news. About 405 forints are now needed to buy one dollar – compared to 324 at the beginning of the year and only 300 at this time last year. The forint also fell against the euro.

The fall confirms that the forint has become the worst-performing currency in Europe this year – something that, along with Hungary’s June inflation of 11.7%, prompted the Hungarian National Bank to raise its weekly deposit rate from 7.75% last week. to 9.75%, and the main rate – from 5.9% to 7.75% at the end of June.

Mr Orbán and his government will argue that he is defending the principle.

But he finds that when you’re up against both the US and the EU, defending principles can come at a price.

https://news.sky.com/story/why-hungarys-minimum-global-corporate-tax-stance-is-causing-angst-well-beyond-brussels-12650022

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