Despite Hungary’s veto, the EU will introduce a global minimum tax
The Hungarian diplomacy has previously accepted, but now vetoed, the European Union’s proposal. Brussels wants to work with member states to adopt a global minimum corporate tax law.
Hungarian veto in the EU
“Tax laws can only be adopted in the European Union if they are supported by all member states,” Prime Minister Gergely Gulyás said at a cabinet briefing on Thursday. Gulyás argued that the European Union would not be able to accept a proposal that the Hungarian government did not like.
Brussels is asking Member States whether they would be willing to vote in favour of a 15 percent global minimum corporate tax. This could be done in the framework of a so-called enhanced cooperation. This would not require 100 percent support, hvg.hu reports. If the plan succeeds, EU finance ministers could vote on the global minimum corporate tax law in Luxembourg in October.
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Global minimum tax
US Treasury Secretary Janet Yellen invented the global corporate minimum tax to fill the US coffers. Something similar is needed for the European Union. The Covid pandemic, the energy crisis and Russia’s war in Ukraine have all had a negative impact on finances.
The Organisation for Economic Co-operation and Development (OECD) has developed the proposal, which is backed by more than 130 Member States. The support is so high because everyone would like to see multinationals taxed where the profits are made, rather than in tax havens.
The global corporate minimum tax only applies to large global companies. Giant global companies with an annual turnover of more than USD 750 million (EUR 746 million). US Republicans oppose a global corporate minimum tax. It is possible that this is why Hungarian Prime Minister Viktor Orbán decided to veto it. Brussels now wants to bypass the Hungarian veto.
Minister of Foreign Affairs Péter Szijjártó spoke about the global minimum tax in Washington this summer, Index.hu reports. “The introduction of a global corporate minimum tax would be a virtual coup de grace for the European economy in the current situation, and the measure would also put Hungary to an extraordinary test,” the Foreign Minister said.
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Source: index.hu, hvg.hu
US Treasury Secretary Janet Yellen DID NOT “invent” the global corporate minimum tax “to fill the US coffers”. What utter tosh. The US used to have a global tax system (US corporations taxed in the US on their worldwide income), which was superseded by a (partially) territorial through the adoption of the Tax Cuts and Jobs Act (TCJA), signed into law by then President Trump in 2017. The system is partially territorial because, whereas it generally excludes foreign-earned income from US taxation, certain other certain types of income, such as foreign-earned capital gains and passive income, are not excluded. So American companies used to pay a lot of tax, regardless, and still pay quite substantially.
The whole Global Minimum Tax development came from (tax) base erosion (and a country taxes the base, right) and profit shifting (to lower tax locations) by multinational corporations, whereby they ended up paying little to no tax at the end of the day. Using clever structures out of reach to smaller companies. So – big corporations ended up putting profits out of reach of tax authorities and had a big competitive advantage on smaller (or more ethical) companies, because they had more cash to play with at the end of the day.
The Global Minimum Tax is aimed at eradicating “the race to the bottom” of tax rates (and there were a lot of no to low tax options out there, either statutory or by way of tax structuring). The aim now is to have a “fair” (call the 15 percent arbitrary – but it is not a crazy rate) corporate tax rate and have companies justify how and where profits are made (basically – what and where are the functions, assets and risks of a company) so the “fair” amount of tax is paid in the appropriate jurisdiction.
If we’re talking unreasonable and tax, let’s focus on our 27% VAT rate. Which actually gets paid by the end customer – also known as all Hungarian domestic consumer. In fact – our VAT revenues actually fund the a large portion of the tax revenue “shortfall” caused by our low corporate tax rate – check out https://www.oecd.org/tax/revenue-statistics-hungary.pdf
Agree with Norbert. Corporations pay only 9% corporate tax and the average Hungarian moron pay 27% VAT-basically subsiding big corporations ( that “donate” money to you know who).
Wait! There’s more – 9% is not the bottom! Hungarian companies are encouraged to subsidize film production and spectator sports. As sponsors, companies are able to achieve effective net tax savings of 2.25% of the financial support they provide for film makers or sport clubs. There is also the option of allocating 80% of the monthly or quarterly tax advance payments and 80% of the payable corporate income tax to support sports and film production is available with the maximum tax credit of 7.5%. Lots of ways Tax savings are used to incentivize companies. Not available to the average Hungarian, though – although they do get the odd Hollywood star roaming the streets or another shiny stadium.