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4th Feb 2023

Opinion

EU must break Orbán's veto on a tax rate for multinationals

  • To reach the global deal, it took three years of intense negotiations, involving all EU countries — Hungary included (Photo: Council of the European Union)
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With a dire winter ahead, all EU countries need all possible tax revenues to help people cope with the impact of Russia's war against Ukraine.

On Tuesday (6 December), EU finance ministers are again set to tackle the issue of transposing the global deal on a 15-percent minimum effective tax rate for multinationals into European legislation.

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This could yield up to €64bn annually. Yet, the Hungarian government led by Viktor Orbán has been blocking it for months. The impotency of the EU to strike a deal is irresponsible and incomprehensible.

More than a year ago, in October 2021, 137 countries across the world reached this historic deal, which for the first time curbs global tax competition. This was a true breakthrough, considering an ever-growing race to the bottom on corporate tax, from an average of 32 percent in 2000 to a shrinking 21.2 percent today, with the lowest headline rate being nine percent in Hungary, as the European Commission's data illustrates.

To reach the global deal, it took three years of intense negotiations, involving all EU countries — Hungary included.

Moreover, EU countries, known as tax havens or very low tax rates jurisdictions, were able to safeguard some advantages in the last round of international negotiations, Hungary in particular.

For the EU to take leadership on tax fairness, the European Commission proposed, a year ago, a directive to make the 15-percent rate a European reality.

The EU tax decisions require unanimity, but it was reasonable to hope for a quick European agreement, as all member states were involved in the global deal.

However, reason did not prevail and after several wasted months and failed attempts, there is still no deal on its transposition into EU legislation.

First, it was Poland blocking it. When the Polish government withdrew its longstanding veto last July, Orbán's government unexpectedly vetoed the agreement.

Then in October, the Czech presidency did not even put it on the agenda of the EU finance ministers.

These national vetoes seriously call into question the viability of the unanimity voting in tax matters and the EU's credibility in general. Europe urgently needs ambitious and fair tax policies to deliver tax justice. This vital objective must not be held hostage to a power play between one against 26 other EU countries.

While there was a common understanding that a European deal was finally within reach next week at the meeting of the EU finance ministers, it can happen that, once again, Orban's government decides to block it.

Our political group, the Socialists and Democrats, has been advocating for a reform of decision-making in tax matters for a long time, to avoid national vetoes that are paralysing the EU's capacity to shape ambitious tax policies. Now there is really no more time to waste.

Therefore, the S&Ds first urge all 27 countries to commit to what they agreed to on the international stage.

However, in case of no European deal next Tuesday, there is a real urgency to move on. Fortunately, there is a way that would allow maintaining the maximum cohesion within the EU and giving a role to the EU to monitor the 15-percent rate implementation in this circumstance: the enhanced cooperation. This procedure enables a minimum of nine EU member states to cooperate in a particular field within the EU if the Union as a whole cannot agree on such cooperation within a reasonable period.

Last September, the five largest EU economies — France, Germany, Italy, Spain and the Netherlands — said that they were "fully determined to follow through on our commitment" and ready to consider "any possible legal means".

We call on them to continue their leading role on delivering the minimum effective tax rate for multinationals by requesting the enhanced cooperation next Tuesday, if the 27 countries fail to agree, again.

By doing so, on 6 December, the EU would finally take back the lead in the fight for tax justice.

Author bio

Aurore Lalucq MEP is the Socialists & Democrats spokesperson on taxation. Paul Tang MEP S&D is chair of European Parliament’s subcommittee on tax matters. Pedro Marques MEP is S&D vice-president responsible for social Europe.

Disclaimer

The views expressed in this opinion piece are the author's, not those of EUobserver.

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