Hungary would even say no to Joe Biden

Hungary will not contribute to any tax increases, including the global corporation tax initiative – said András Tállai to Magyar Nemzet. The Deputy Minister at the Finance Ministry thinks the initiative, which is supported by Joe Biden and others, reveals a lot about how the big powers want to win the race for international investments: taking away other countries’ economic freedoms.

Duluth, 2021. április 30. Joe Biden amerikai elnök beszédet mond elnöksége 100. napja alkalmából a georgiai Duluth városban 2021. április 29-én. MTI/AP/Evan Vucci Fotó: Evan Vucci

The Hungarian government recently presented the tax laws for the next year; these and the proposals already passed clearly show how the government wants to develop the tax system. “The employer tax will be reduced again while the income-tax exemption will be introduced for employees under 25 years of age. These two measures alone will keep 300 billion HUF in people’s pockets and in the Hungarian economy. The tax reduction policy will thus continue” said András Tállai to Magyar Nemzet. The Deputy Minister also added: while the Hungarian government is trying to restart the economy by lifting the load on people, one of the most significant international initiatives is supporting the contrary with a global minimum corporate tax. The idea has very strong support from US President Joe Biden. But what is the global corporate tax?

The basic idea behind the rule was to create a framework for uniform taxation of big tech giants. But today it has become more about introducing a minimum corporate tax rate. Recently elected US President Joe Biden mentioned not long ago that the minimum global corporate tax rate should be 21 percent. Such a system is already under construction by the Organization for Economic Co-operation and Development. The OECD has been working on the details for a longer time now.

“Hungary will not contribute to the introduction of any tax raises. Simply put, we are unable to support any kind of tax increase, even if the idea is backed by especially powerful supporters” stated the deputy minister and added: there are no ideological or personal sentiments behind the government’s approach. András Tállai explained that Hungary has made major efforts to balance its budget within the past few years. These efforts were effective and resulted in – before the pandemic and consequential global crisis – outstanding growth in our country, the creation of many jobs, higher wages and increasing numbers of foreign investors choosing Hungary. “Tax policy played a key role in these results; exercising our economic sovereignty, we reduced taxes to historically low rates, and for some time now Hungary has had the lowest corporate tax rate in the entire European Union. The decision-making process of several investors considering Hungary was positively influenced by our low tax rate,” the Deputy Minister said. He then continued: “Hungary will not give up one of the most important elements of its economic sovereignty: the right to tax.”

“Not even if this would cause conflict with the new US President?” we interjected.

“The idea of a global minimum corporate tax is in the interests of several high-taxing economic powers. For them, international tax competition is a disadvantage and those substantially progressing states with transparent rules and low taxes present a problem.

These great powers want to win global competition for investment by taking away other countries’ right to freedom.”

Said the Deputy Minister. He continued: “We cannot agree to this under any circumstances, not even if we are potentially going against Joe Biden’s expectations. The Hungarian government, as always, seeks positive relations with America’s leadership, however, the interests of another nation cannot precede those of Hungary” noted András Tállai. He concluded: the government cannot tolerate the curtailment of Hungary’s financial sovereignty, so they will fight to preserve maximal economic self-determination.

We also asked the President of the State Audit Office of Hungary about the global minimum tax plans. In his statement, (which you can read here) László Domokos analyzed the possible losses and pointed out the importance of the local business tax.

Gyurcsány and Biden? Our views on the causes and possible consequences of the minimum corporate tax are presented in this article.