What does the minimum corporate tax have to do with the Hungarian cohesion funds? And what does financial assistance to Ukraine during 2023 have to do with the covid recovery fund for Hungary? Well, the procedures of the European Union, by which governments make use of their veto powers to delay or speed up debates, or to link files on which to exercise blackmail.
Hungary has been delaying for months its approval of the minimum corporate tax of 15%, agreed in the OECD. Just as he has been making requests for weeks with the fund of 18,000 million for Ukraine, to the point that the rest of the countries promised last Saturday to move it forward, with or without Orbán.
But, in the end, late this Monday night the ambassadors of the 27 to the EU have found a compromise, a landing point, which basically involves reducing the millions blocked from Hungary due to its authoritarian drift. It does not matter that the European Commission has reaffirmed at the end of last week that the sanction would have to be 7,500 million, after the EU finance ministers requested a new analysis last Tuesday. The 27 have decided that this blockade is not 65% of three cohesion fund programs, but 55%, which is equivalent to about 6,300 million.
It doesn’t matter, because the 27 have preferred to give in to Orbán’s pulse in exchange for the rest of the files being released. And, by the way, they have agreed to approve the Hungarian recovery plan, also subject to 27 major conditionalities on the rule of law, but which had to receive approval before December 31 so that the 5,800 million in transfers that Hungary has asked.
Minimum tax for large companies
The 27 have reached an agreement to apply at the EU level the minimum tax component, known as Pillar 2, of the OECD’s international tax reform.
“The effective application of the directive will limit the race to the bottom in corporate tax rates,” says the EU Council: “The profits of large multinational and national groups or companies with a combined annual turnover of at least 750 million euros will be taxed at a minimum rate of 15%. The new rules will reduce the risk of base erosion and profit shifting and ensure that the largest multinational groups pay the agreed global minimum rate of corporate tax.”