With an overwhelming majority, the parliament said no to the global minimum tax

On Tuesday, the Parliament rejected the introduction of the global minimum tax in Hungary by a huge majority. The left was repeatedly in favor of raising taxes. Our country continues to advocate that all states have the widest possible sovereignty in the field of taxation, it was stated in the earlier discussion of the proposal.

The Parliament decided to reject the European Union directive on the introduction of the global minimum tax. The deputies accepted the proposal with 118 yes, 32 no and 6 abstentions.

In an exceptional procedure, the House discussed the proposal for a parliamentary resolution submitted by the economic committee regarding the global minimum tax. Referring to the new global economic situation caused by the Russian-Ukrainian war, with particular regard to wartime inflation and the wartime economic crisis, the proposal initiated the rejection of the draft Council directive on the global minimum tax rate applicable to multinational groups in the EU.

Erik Bánki, the chairman of the proposing economic committee, said: the proposal to oppose the introduction of the global minimum tax serves to increase the competitiveness of the Hungarian economy. He recalled: the countries of the Organization for Economic Cooperation and Development (OECD) initially wanted to prevent tax evasion by large technology companies. They agreed on a uniform 15 percent taxation of the tech giants.

However, in parallel, the European Parliament started to develop a second pillar, which would extend the 15 percent tax not only to technology companies, but also to all multi-companies.

However, many questions in this regard have not been worked out, he pointed out. There is no answer, for example, to the suggestion that the tax difference can be collected not only by the mother country, but also by the country hosting the subsidiary.

Erik Bánki stated: until the first pillar has been developed, the creation of the European directive is unnecessary, because it not only does not bring a budget surplus to the European countries, but also puts them at a competitive disadvantage compared to large American or Chinese companies and their home countries.

The corporate tax burden in Hungary is 7.5 percent, the politician pointed out, so the global minimum tax would double that. The corporate tax here is the lowest in Europe - 9 percent - which encourages large companies not to take their profits out of the country, but to tax them here. He also pointed out that the United States also applies an average tax burden of 7.5 percent to companies.

He also spoke about how the Russian-Ukrainian war has reshaped the world economy, which makes it necessary to stimulate the economy.

According to the politician, while the effort to tax tech companies transformed into the introduction of a general minimum tax, the United States realized that it was not in its interest at all. He said: it is clear that they are sabotaging the adoption of the first pillar.

In the meantime, the OECD has already admitted that the tax on tech companies will certainly not be introduced from next January, but it is also doubtful whether this can be implemented a year later. In this situation, Europe cannot rush forward, because that would limit itself, he emphasized.

András Tállai, the State Secretary of the Ministry of Finance, said earlier in the debate that the government supports the economic committee's proposal. He explained: the proposal on the global minimum tax would stipulate that if a country applies a withholding tax lower than 15 percent, a large multinational company must pay the difference in the home country. the purpose of this is to prevent companies from relocating to another country solely because of lower taxes.

The Organization for Economic Cooperation and Development (OECD) started developing the proposal in 2019. The basic idea was that the states should tax digital giants according to uniform rules, so that they do not pay a fraction of what a locally operating manufacturing company.

These companies really shortened state budgets by a significant amount, so action against them is justified, he emphasized. And the original goal was to tax where value is created, where consumption can be linked. However, all this took a completely different direction. developed economies are now working on defining a minimum level in corporate taxation - he explained.

He said that Hungary collects the lowest corporate tax in the EU, which is a significant advantage in international economic competition. If the rules are implemented, a German multi-company will pay a 9 percent tax on its profits in Hungary, while a 6 percent tax will be paid to the German state on its activities here. In other words, the goal of the largest economies is to eliminate tax competition that is unfavorable to countries with high taxes. This is unfair, which tries to restrain the development of countries like Hungary, he declared. That is why Hungary continues to advocate that every state has the widest possible sovereignty in the field of taxation, he said.

Kristóf Szatmáry (Fidesz) said that his faction supports the motion. According to him, the goal that everyone can support - the taxation of tech companies - has been transformed in such a way that it is particularly harmful to the Hungarian economy. He stated: everyone would support the original goal. He put it this way: a significant number of European bureaucrats do not look at the interests of the European people, but at nebulous international goals, as they did with the sanctions due to the Russian-Ukrainian war. Although the second pillar apparently serves the same purpose, it would still have a detrimental effect on many European economies.

The goal was to prevent these companies from evading taxation, but this turned into a second pillar in about a year and a half. This is no longer about tech companies, and not about paying the tax difference in a specific country. It turned into a tax that serves nothing other than the market protection efforts of large economic centers and forcing other countries to raise their tax rates, he said.

In the debate, Gyurcsányist Dávid Ferenc said that while the whole world and the EU welcome the initiative to introduce a global minimum tax, the Hungarian government wants to prevent it, because it cannot do without conflict, even if it is in the country's interest, and this would seriously causes damage.

MTI / Hungarian Newspaper

Photo: MTI/Szilárd Koszticsák