In a dramatic 11th-hour U-turn, Hungary scuppered Friday an EU-wide deal to establish a minimum corporate tax rate of 15 percent, citing the worsening economic situation in Europe.
“Interest rates and inflation are rapidly increasing, supply chains are also disrupted,” Hungarian Finance Minister Mihály Varga said at a meeting of EU finance ministers in Luxembourg. “All these unfavorable developments call for significant losses for businesses and households.”
“Under such circumstances, introducing the global minimum tax at such an early stage would cause serious damage to the European economies,” he added.
Given that unanimity is required in tax matters, any single country can block decisions — a bone of contention that has led to calls for reform.
“It’s absolutely key that we move from unanimity to [qualified majority voting] on tax related issues,” said French Finance Minister Bruno Le Maire.
The catch is that for the EU to move away from unanimity, it needs consensus — a classic catch-22.
Budapest’s veto was a blow in particular to the French Presidency of the European Council, which had high hopes of reaching a deal Friday after Poland — the last country that held out until recently — dropped its opposition.
“What makes this issue so lovely is that as soon as you get one problem sorted out, another comes along,” lamented Le Maire, reminding Hungary that it had previously given its approval to the deal and that its concerns had been addressed. But Le Maire said he remained “lucidly optimistic” that a deal would be reached further down the line.
The ball will then be in the court of the Czechs, who take up the Presidency baton on July 1, to try to get Budapest to move.