Hungary Throws Down Another Gauntlet to EU

Unfortunately, Orban is still mesmerised by the 'EU project'. I just hope Hungary doesn't get sucked into the maelstrom when the EU sinks.

From Balkan Insight

By Tim Gosling, Edit Inotai, and Edward Szekeres

Budapest is blocking a deal on a global minimum tax in another open challenge to the EU.

Hungary’s finance minister has blocked the EU directive on a 15-per-cent global minimum corporate tax, dashing the hopes of the outgoing French EU Presidency that a resolution to this issue will still be found during its time in office.

OECD countries have long negotiated about a 15-per-cent global minimum tax to prevent multi-billion companies from evading taxes. The levy would apply to companies with revenues of over 750 million euros year. The reform has been endorsed by 136 countries comprising more than 90 per cent of global GDP and is expected to generate over 140 billion euros in revenue for countries around the world and around 48 billion euros for the EU.

According to the agreement, countries would retain their sovereign right to offer lower corporate tax rates, but if that rate is lower than 15 per cent, other countries would have the right to collect the difference. Hungary currently has the lowest corporate tax in the European Union, at 9 per cent; in this case, the home country of a taxed company would be entitled to levy a 6-per-cent extra tax . As a consequence, Hungary would likely have to raise the tax rate to the 15 per cent minimum not to lose out on taxing rights.

Ireland and Estonia, the two other low-tax countries in the EU, have also raised criticism but the offer of a 10-year transition time appeared to win them over.

A week ago, Hungarian Prime Minister Viktor Orban warned that Hungary would still veto the European tax directive, which would pave the way for the introduction of the global minimum tax in the EU.

“Europe is in deep enough trouble without the global minimum tax,” Foreign Minister Péter Szijjártó said. “We’re not supporting a hike in taxes for Hungarian companies and we’re not willing to put jobs in danger.”

Szijjártó also told US Secretary of State Antony Blinken that the 15-per-cent tax would strike “another low blow at European competitiveness” in the middle of the war in Ukraine, even though the deal is meant to be applied at the global level, not just to Europe.

Economist Zoltan Pogacsa argues, however, that Hungary’s fundamental problem is that its corporate sector is not properly taxed.

“If we do not collect taxes, the state will not have enough revenue. It would be much better if we had regular, high but predictable taxes like in  Western Europe, other than introducing new, windfall taxes whenever there is a budget problem,” he said in an interview.

Some say that besides the technical concerns, Hungary is playing a similar game to Poland before. Warsaw also threatened to veto the global minimum tax but seemed to give up its reservations once Brussels announced that Poland could have access to its Recovery and Resilience Fund.

Hungary’s resistance may also be smoothed with some money, some say, although the European Commission seems determined to keep Hungary’s 7-billion-euro slice of the recovery fund and 9 billion in loans frozen due to lack of anticorruption guarantees.

Orban’s constant fights with the EU, meanwhile, encourage some Hungarian politicians to come up with unlikely suggestions on to transform the EU and its decision making.

Four ruling Fidesz party MPs, including Speaker of the House Laszlo Kover and Deputy Prime Minister Zsolt Semjen, tabled a draft resolution in the Hungarian parliament which suggests eliminating the European Parliament in its present form in favour of a chamber of directly elected politicians, arguing that national parliaments delegate members to the reformed parliament.

Fidesz MPs would also give veto rights to national parliaments on certain EU issues, strengthen national sovereignty und reject pan-European movements. The proposal goes against current mainstream calls for further strengthening the European Parliament and perhaps offering voters pan-European lists instead of only national lists.

In the debate about the future of Europe, Prime Minister Orban is expected to mention some of these ideas as the Hungarian contribution to the debate. Opposition MEP Klara Dobrev from the Democratic Coalition, Socialists and Democrats warned on Facebook that such ideas might pave the way for Hungary’s departure from the EU – “Huxit”.

“We will not let it happen. Hungarians are pro-European,” she wrote.

But most experts doubt that Orban, who has repeatedly stressed that he sees Hungary’s future in the EU, would seriously contemplate leaving the bloc, especially, in the current global situation. The resolution could serve to rally Fidesz voters and help the government in its anti-Brussels narrative but will stop short of openly breaking ranks with the EU.