Five EU states commit to introducing a minimum corporate tax

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Some of the EU’s largest member states have pledged to implement a comprehensive minimum corporate tax despite opposition from Hungary, which refused to back the bloc’s proposals for the levy.

In a joint statement on Friday, the finance ministers of Germany, France, Italy, Spain and the Netherlands pledged to “swiftly” introduce a minimum effective corporate tax rate of 15% in their own country, adding that they wanted the new regime in place. by 2023.

“We are ready to implement global minimum effective taxation in 2023 and by all legal means possible,” they said in a statement released Friday during the finance ministers’ meetings in Prague.

The European Commission has proposed an EU directive implementing the minimum rate, which is part of the OECD’s landmark international corporate tax agreement reached last year. The agreement aims to eradicate the use of tax havens by multinationals.

But the rules have been blocked, first by Warsaw and more recently by Budapest. Warsaw has since dropped its objections.

Changes to EU tax rules usually require unanimity among member states, but some capitals have called for the tax plan to be implemented through a process called ‘enhanced cooperation’, which means other member states could proceed without Hungarian approval or participation.

Bruno Le Maire, France’s finance minister, told reporters ahead of the Prague meetings that enhanced cooperation was a way forward but that “national options” should also be on the table.

Germany said earlier this week that it was ready to implement the measure unilaterally if an EU-wide agreement could not be reached. Christian Lindner, Germany’s finance minister, said on Friday that while Berlin strongly supports a European approach, it would use national law to enforce the tax regime if necessary.

The joint declaration of the five ministers does not explicitly mention enhanced cooperation. Some EU capitals are reluctant to use the complex process on a tax issue, marked by an unsuccessful attempt to deploy it to impose a levy on financial transactions a decade ago.

Valdis Dombrovskis, the commission’s executive vice-president, told reporters that his preferred solution remained an EU-wide solution.

The five ministers said the introduction of the minimum rate was an important step towards “fiscal justice”, adding in their statement: “If unanimity is not reached in the coming weeks, our governments are fully determined to give following our commitment”.

Hungary has vehemently defended its 9% corporate tax rate. Its foreign minister, Péter Szijjártó, said earlier this year that given the current economic downturn, the minimum tax would be a fatal blow to the European economy and expose Hungary to “extraordinary challenges”.

However, many EU capitals view Hungary’s move as an attempt to create leverage in further disputes with Brussels rather than on the merits of the tax proposal. Budapest is embroiled in a dispute with the EU over the rule of law and has yet to reach an agreement with the commission on releasing its share of the bloc’s post-Covid-19 recovery fund.

Budapest was ready to agree to the minimum corporate tax earlier this year, before withdrawing its support in June.

Gergely Gulyás, chief of staff to Hungarian Prime Minister Viktor Orbán, insisted on Thursday that the EU could not pass the measure unless his country agreed to it. Hungary’s finance ministry and government spokespersons could not immediately be reached for comment on Friday.

Additional reporting by Marton Dunai in Budapest and Mary McDougall in London

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