Hungarian tax system remain competitive despite global minimum tax?
The government aims to preserve the competitiveness of its tax system, notwithstanding implementation of the global minimum tax, Mihály Varga, the finance minister, told the heads of large Hungarian companies.
At the meeting, Varga discussed Hungary’s implementation of the EU directive on the global minimum tax (GMT), and noted that Hungarian companies paid one of the lowest public taxes in Europe.
Hungary must incorporate the GMT into its legal system by January 1, 2024, the ministry said in a statement.
Hungary took an active role in fine-tuning the rules, he said, and succeeded in ensuring that investments benefit from a tax break and that a broad range of taxes paid in Hungary should be taken into account, he said.
When transposing the directive, the government aimed to ensure that any additional tax deducted should remain in Hungary and red tape on businesses should increase as little as possible, he added.
Also, the government is shaping global minimum tax regulation so that Hungary can carry on offering an attractive investment environment for businesses, and that income generated in Hungary is taxed exclusively in Hungary.
GMT liability applies when the income tax rate of a multinational company in a state effectively is below 15 percent, affecting companies with consolidated income of 750 million euros in at least two of the previous four years.
After consulting companies and receiving their proposals, the ministry will submit detailed rules for implementing the EU directive on GMT to parliament, to coincide with the submission of autumn tax laws, the statement said.
The “global minimum tax” is an outrageous concept. It is one of the most egregious Big Government overreaches EVER, second only to the demand that the globalist-socialist overlords have the power to mandate that people take experimental gene therapies masquerading as vaccines and other experimental drugs. It is shocking that this was agreed with practically no discussion or opposition.
OK – the facts: The Global Minimum Tax aims to put an end to decades of tax competition between governments to attract foreign investment.
Governments wanted to discourage multinational companies (MNCs) from shifting profits and tax revenues to low-tax countries regardless of where their sales are made. MNCs are in a unique position to “game the system” and thus avoid paying their fair share. They routinely pay less tax as a percentage compared to local companies (speaking of unfair competition). Importantly, the companies impacted by GMT are those with an annual revenue of over 750 million euro and are already used to a fair deal of “red tape”. The long and short, if and MNC pays lower rates in a particular country, other governments could “top up” their taxes to the 15 percent minimum, eliminating the advantage of shifting profits. So If we are below, other countries would be collecting the tax.
So. Our Politicians were on a collision course with the one hundred plus Members of the Organisation for Economic Co-operation and Development (OECD) on the Global Minimum Tax. As usual, they knew better (good thing there is no veto power, here – although we were tellingly the last European country to sign up, a great look as per usual). And, again, we know how this low corporate tax rate is funded, right? By the WORLDs highest VAT rate. Paid by the end users, NOT companies.
Fun data to play around with: https://data.oecd.org/tax/tax-on-goods-and-services.htm#indicator-chart – you can also toggle other tax types