The government has responded to the global minimum tax

The Minister of Finance emphasized that due to the effects of the war, the European economy is already facing serious challenges, according to the Hungarian position in the current situation the tax burden on manufacturing companies should not be further increased.

A press release from the Ministry of Finance also points out that the Organization for Economic Co-operation and Development (OECD) proposal was originally aimed at taxing large digital companies. This, in turn, has changed, the focus has shifted, and an additional tax burden would be imposed on producer companies. Mihály Varga stated that “due to the protracted war, the escalating energy prices, the war inflation and the interrupted supply chains, such a tax increase would cause serious damage the European economy, in particular the countries of Central and Eastern Europe ’.

Competitiveness vis-à-vis other parts of the world would be further undermined by the introduction of a global minimum tax in Europe for the first time, the finance minister added, adding that “thanks to tax cuts over the past decade, Hungary has one of the lowest taxes on labor and businesses in Europe”. So, according to the Ministry of Finance, the introduction of a global minimum tax would lead to tax increases and exemptions, so the government in its current form

does not support the adoption of an EU directive.

The global minimum tax

We have dealt with this tax name several times before. It has long been suspected that Hungary, with a 9% corporate tax rate, will certainly be involved in the introduction of a global minimum tax. Multinational companies whose actual tax burden on a subsidiary in a given country is less than 15 percent.

Regulation a EUR 750 million (nearly HUF three hundred billion) applies to groups of companies with consolidated sales, which rules would enter into force on 1 January 2023 for subsidiaries in OECD countries and from 2024 for third countries. The regulation can be applied if the quotient of the effective tax rate (ETR) in the country of the subsidiary, ie the deductible taxes and the specially defined tax base, is less than 15 percent.

Although Minister of Finance Mihály Varga had previously indicated that it would be accepted by the Hungarian government, the new tax bill later became the subject of political debate. Estonia, Poland and Hungary have indicated that they will not support the adoption of the directive until it has been approved by the US Senate.

Something has changed about this this week

Almost immediately, the Economic Affairs Committee (Gb) of the parliament on Monday approved the submission that Hungary refuses to adopt an EU directive on the introduction of a global minimum tax. The proposal was presented by Erik Bánki, President of the Gb.

According to the justification for the referral, in the light of the “new world economic situation caused by the Russian-Ukrainian war, and in particular war inflation and the war economic crisis”, the following decision is taken:

Parliament opposes the adoption of a draft Council directive on the global minimum tax rate for multinational groups in the EU. This Decision shall enter into force on the day following that of its publication.

According to the Commission’s proposal, the necessary expert work “is not progressing at the right pace at global level, so the adoption of the directive would precede the final adoption of global rules. As regards the modalities of the global minimum tax, the proposal is not ready for implementation. The work is slow and it is uncertain when it will end, but it is also uncertain. ” All this already indicated that the government no longer supported the application of a global minimum tax.

(Cover image: Mihály Varga on June 15, 2022. Photo: Zsolt Szigetváry / MTI)

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