Democracy Digest: Hungary Throws Down Another Gauntlet to 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...

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