Biden punishes Hungary, and then is unable to introduce the global minimum tax in his country
Although US President Joe Biden signed the package of anti-inflation laws, an important implementation of the global minimum tax was ultimately left out of the Senate negotiations – this is a huge turn after the Biden administration exerted unprecedented diplomatic pressure on Hungary, which vetoed the adoption of the tax-free European Union. The United States has canceled the double taxation agreement between the two countries, which can be stated based on the latest developments, in a spectacular contradiction of active foreign policy involvement and domestic policy failures.
American implementation of the global minimum tax
To VG’s interest, Gergely Czoboly, a tax expert at the Jalsovszky Law Firm, pointed out that the law passed last week was the immediate predecessor of the Build Back Better legislative package linked to Biden, which would have been an important element of Pillar 2 of the Organization for Economic Co-operation and Development (OECD). American implementation of global minimum tax rules. Only during the Senate hearings did Joe Manchin, the West Virginia senator from the Democratic party, withdraw from the supporters, thus not allowing the planned regulation to be adopted. (Since Senate approval was rejected by all Republicans in opposition, it would have required the support of all Democratic senators.)
Senator Joe Manchin’s main argument for ruling out a global minimum tax was not to put the United States and US-based multinational corporations at a disadvantage in world markets by introducing it ahead of other countries.
For the corporate tax group, a multinational group is costly, such as labor wages or material costs, and if European and Chinese competitors can produce and sell with taxes, then the higher taxed companies are at a disadvantage.
Without Hungary, the introduction of the global minimum tax may be illegalIt may be against the basic treaty of the European Union if the global minimum tax is introduced without Hungary, within the framework of strengthened cooperation. |
Hungary stood up for its own interests and those of the EU
By the way, the Hungarian argument was exactly the same: Finance Minister Mihály Varga said, among other things, that Hungary stood up for its own and the European Union’s long-term interests, while Foreign Affairs and Trade Minister Péter Szijjártó stated that European competitiveness is already in ruins due to the runaway energy prices, the and the introduction of a minimum tax would mean a coup d’état.
Gergely Czoboly reiterated that it stems from the logic of the regulation that if a sufficient number and size of countries introduce the minimum, it will indirectly force those lagging behind to implement it as well. Since China did not show any particular interest in the rules even during the OECD negotiations, the United States and the European Union should act so that the tax gender is also introduced by others.
It is no coincidence that the United States government put strong diplomatic pressure on Poland and Hungary because they prevented the adoption of the global minimum tax directive in the Council of the European Union. Because the EU has not yet adopted the necessary rules, they indirectly made it difficult for the Biden administration.
– date, who is the tax expert. According to Nagy, whether the American government will have another chance, since the midterm elections are approaching in the country, as a result of which the balance of power in the legislature may even change, and if it loses the majority in the Democratic Party, then the chances of introducing the American minimum will decrease.
The line-up was different under Donald Trump
By the way, the American legislature already adopted a “global minimum tax”, the GILTI rules, under the presidency of Donald Trump. However, this differs in significant elements from the so-called pillar 2 solution discussed in the OECD: on the one hand, the GILTI tax rate is higher than the global minimum tax, and on the other hand, its calculation is much lighter, so overall it does not comply with OECD rules.
A minimum tax regulation was also introduced in the newly adopted package, the tax rate of which has already become 15 percent, similar to the OECD agreement, but the calculation technique is still in line with the global agreement based on expert consensus. The consequence of this is that the foreign subsidiaries of US-based company groups are subject to rules that allow other countries to collect the additional tax – even before the United States.
The tax treaty is more important to the Americans than to HungaryAccording to EY tax experts, creating legal certainty is more in the interest of US companies. |
This means, not least, that the expected greater task in the country of the subsidiaries will fall on the local members, since they are not exempted from the complex administrative tasks by having the American center perform them instead.
It will also be an exciting realization for the managers of the Hungarian subsidiaries that they will have significant tasks in connection with the global minimum tax if the EU introduces the rules, but the USA does not
– drew attention to the specialist of the Jalsovszky Law Office.
The question is whether the American failure will discourage Germany and France, or whether they will throw themselves into the negotiations that will be restarted in the autumn with even greater vigor, and it is also uncertain what effect the American example will have on the United Kingdom. The ongoing Prime Ministerial candidate competition could easily have a result that forces the island nation to opt out of the global minimum tax, as Foreign Minister Liz Truss and former Finance Minister Rishi Sunak are bidding against each other on the topic of tax reduction.