EU fails to agree on corporate tax reform as Hungary vetoes overhaul

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FILE PHOTO – Hungarian Finance Minister Mihaly Varga speaks during a business conference in Budapest, Hungary February 19, 2022. REUTERS/Bernadett Szabo

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LUXEMBOURG, June 17 (Reuters) – The European Union’s adoption of a minimum corporate tax of 15% was again called into question on Friday as Hungary raised last-minute objections that prevented a agreement between the 27 EU states to turn it into law.

Hungarian Finance Minister Mihaly Varga told his European counterparts at a meeting that his country could not support corporate tax reform at this stage, dashing hopes of a deal on Friday after Poland abandoned his own objections.

“The work is not ready,” Varga said in a public session. “I think we have to continue the effort to find a solution.”

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French Finance Minister Bruno Le Maire, who had made the tax deal a key objective of France’s six-month EU presidency ending in two weeks, made no secret of his disappointment but urged ministers to continue work in order to reach an agreement at a later stage. arrange.

At the meeting, Polish Finance Minister Magdalena Rzeczkowska formally dropped her opposition to the deal.

The EU talks aimed to turn into law a comprehensive corporate tax reform that was agreed last October by nearly 140 countries.

The Mayor said all technical issues had long since been resolved, implying that the standoff was due to political concerns.

The new objection illustrates the political complexities of global corporate tax reform, said Manal Corwin, head of domestic tax practice at KPMG in Washington.

“Obviously this is not the end of the story, as we have seen objections emerge and then be removed before,” Corwin said, adding that some countries may choose to apply the minimum tax themselves. .

NON-TAX DISPUTES

Poland and Hungary are at odds with the European Commission, which has delayed receiving money from the COVID-19 recovery fund due to questions about their stance on the rule of law and other EU values. EU.

Earlier in June, the Commission approved payments to Poland, while EU recovery funds for Hungary remain frozen.

The overhaul set a global minimum corporate tax of 15% for large multinationals and gave other countries a larger share of the tax on the profits of major US digital groups such as Apple Inc (AAPL.O) and Alphabet Inc (GOOGL.O) Google .

The US Treasury, which helped broker the corporate tax reform deal last year, expressed optimism that Hungary would soon drop its objections.

“This is a unique opportunity to end the corporate tax race to the bottom, level the playing field for American businesses, and reduce incentives to shift profits and jobs. overseas,” Treasury spokesman Michael Kikukawa said.

The reform was originally due to be applied in 2023, but its implementation has now been effectively pushed back to 2024. read more

The Biden administration is also struggling to pass broad spending legislation that would implement the global minimum tax agreement. Republicans and some moderate Democrats in Congress have opposed proposed tax hikes, including raising the current 10.5% U.S. overseas tax rate to 15%.

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Reporting by Francesco Guarascio @fraguarascio; additional reporting by David Lawder and Leigh Thomas; Editing by William Maclean and Toby Chopra

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