Some of the EU’s largest member countries have pledged to implement a planned global minimum corporate tax, despite opposition from Hungary, which has refused to support the bloc’s tax proposals.
In a joint statement on Friday (9), the economy ministers of Germany, France, Italy, Spain and the Netherlands pledged to “rapidly” adopt a minimum effective rate of 15% of corporate tax in their countries, adding that they want to the new regime to apply until 2023.
“We are ready to implement global minimum effective taxation in 2023 and by any legal means possible,” they said in a statement released on Friday during the meetings of economy ministers in Prague (Czech Republic).
The European Commission has proposed an EU directive implementing the minimum tax rate, which is part of the historic OECD (Organization for Economic Co-operation and Development) international agreement on corporate taxes signed last year. The agreement aims to end the use of tax havens by multinationals.
But the rules were blocked, initially by Poland and more recently by Hungary. The first has since dropped its objections.
Changes to EU tax rules generally require unanimity among member states, but some capitals have called for the tax plan to be implemented through a process called “enhanced cooperation”, meaning other member countries can move forward without EU approval or participation. Hungary.
Bruno Le Maire, the French finance minister, told reporters ahead of meetings in Prague that enhanced cooperation was a way forward, but that “national options” should also be on the table.
Germany said it was prepared to implement the measure unilaterally if an EU-wide agreement is not reached. Christian Lindner, the German finance minister, said on Friday that while Berlin strongly supports a European approach, it will use national law to bring the tax regime into effect if necessary.
The joint statement by the five ministers did not explicitly mention enhanced cooperation. Some EU capitals are wary of trying to use the complex process on a tax issue, marred by a failed attempt to use it to tax financial transactions a decade ago.
Valdis Dombrovskis, the commission’s executive vice president, told reporters his preferred solution remained the EU-wide solution.
The five ministers said the introduction of the minimum rate is an important step towards “tax justice”, adding in their statement: “If unanimity is not achieved in the coming weeks, our governments are fully determined to deliver on our commitment”.
Hungary has strongly defended its 9% corporate tax rate. Its foreign minister, Péter Szijjártó, said earlier this year that, given the current economic crisis, the minimum tax would deal a lethal blow to the European economy and expose Hungary to “extraordinary challenges”.
However, many EU capitals see Hungary’s stance as an attempt to gain leverage in other conflicts with Brussels, rather than referring to the merits of the tax proposal. Budapest is in dispute with the EU over the rule of law and has yet to reach an agreement with the commission to unlock its share of the bloc’s post-Covid-19 recovery fund.
Budapest was willing to agree to the minimum corporate tax earlier this year, before withdrawing its support in June.
Gergely Gulyás, Hungarian Prime Minister Viktor Orbán’s chief of staff, insisted on Thursday that the EU could not pass the measure unless his country agreed to it. The Hungarian Ministry of Finance and government spokespersons could not be reached on Friday for comment.
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