Hungary blocks EU adoption of global minimum tax

LUXEMBOURG — Hungary on Friday opposed the implementation of an internationally agreed minimum tax on big multinationals, in a fresh blow against EU unity from the government of Prime Minister Viktor Orban.

France, which currently holds the EU's rotating presidency, had hoped to achieve an agreement after Poland dropped its opposition after months of negotiations.

At a meeting of EU finance ministers, Hungary said that given the economic instability in the wake of Russia's invasion of Ukraine, it would be unwise to hurry through the measure.

"Under such circumstances introducing the global minimum tax at such an early stage would cause serious damage to the European economies," said Hungarian Finance Minister Mihaly Varga.

The EU is trying to seal into law a landmark agreement by nearly 140 countries that forces governments to impose a 15 per cent minimum tax on the world's biggest companies.

France's six-month EU presidency ends on June 30 and French Finance Minister Bruno Le Maire held out hope that he could win over Budapest "in the next few days". 

"What makes this issue so lovely is that as soon as you get one problem sorted out, another comes along," he quipped to his fellow ministers in a public session of their meeting.

Le Maire's ambition is that the 27-member bloc be the first jurisdiction to implement the agreement brokered by the Organisation for Economic Co-operation and Development (OECD). The plan needs the vote of all EU countries in order to pass.

Hungary's Varga warned that other signatories to the global agreement were far from implementing the deal, and that Europe could be disadvantaged if it moved too quickly.

"We as Europe are definitely not late as until now, none of our partners neither in America nor in Asia have transposed" the minimum tax, he said.

The resistance by Hungary comes when its relationship with EU partners is fraught, with Budapest along with Warsaw seen as steering away from the bloc's democratic values.

Despite its arguments, the Hungarian veto of the minimum tax will be seen in Brussels as a means of pressure to obtain the release of 7 billion euros ($7.3 billion) in grants planned under the European pandemic recovery plan.

Poland's acceptance of the minimum tax came after Brussels accepted Warsaw's recovery plan, which should see it receive 36 billion euros in grants and loans over the next several years.

The global minimum tax is just one part of the OECD deal, and at the heart of Poland's criticism was that the other key part, or "pillar one", needs to be implemented at the same time.

In exchange, Warsaw won some assurances on this part of the OECD deal.