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Five EU states vow to introduce minimum corporate tax

Some of the EU’s biggest member states have vowed to implement a planned global minimum corporate tax despite opposition from Hungary, which has refused to back the bloc’s proposals for the levy.

In a joint statement on Friday, the finance ministers of Germany, France, Italy, Spain and the Netherlands pledged to introduce a minimum 15 per cent effective corporate tax rate in their own countries “swiftly”, adding that they wanted the new regime in place by 2023.

“We stand ready to implement the global minimum effective taxation in 2023 and by any possible legal means,” they said in a statement issued during Friday’s meetings of finance ministers in Prague.

The European Commission has proposed an EU directive implementing the minimum rate, which forms part of the landmark international OECD corporate tax agreement struck last year. The deal aims to stamp out the use of tax havens by multinationals.

But the rules have been blocked, initially by Warsaw and more recently by Budapest. Warsaw has since dropped its objections.

Changes to EU tax rules usually require unanimity among member states, but some capitals have called for the tax plan to be implemented via a process called “enhanced co-operation”, meaning other member states could press ahead without Hungary’s approval or participation.

Bruno Le Maire, French finance minister, told reporters ahead of the meetings in Prague that enhanced co-operation was one way of pushing forward but that “national options” should also be on the table.

Germany said earlier this week that it was prepared to implement the measure unilaterally if an EU-wide agreement could not be found. Christian Lindner, German finance minister, said on Friday that while Berlin strongly supported a European approach, it would use domestic law to bring the tax regime into force if necessary.

The five ministers’ joint statement did not explicitly mention enhanced co-operation. Some EU capitals are wary of attempting to use the complex process on a tax matter, scarred by a failed attempt to deploy it to ram through a levy on financial transactions a decade ago.

Valdis Dombrovskis, commission executive vice-president, told reporters his preferred solution remained an EU-wide one.

The five ministers said introducing the minimum rate was an important step towards “tax justice”, adding in their statement: “Should unanimity not be reached in the next weeks, our governments are fully determined to follow through on our commitment.”

Hungary has vociferously defended its 9 per cent corporate tax rate. Its foreign minister Péter Szijjártó said earlier this year that given the current economic downturn, the minimum tax would be a lethal blow for the European economy and would expose Hungary to “extraordinary challenges”.

However, many EU capitals see Hungary’s move as an attempt to create leverage in other conflicts with Brussels rather than being about the merits of the tax proposal. Budapest has been locked in dispute with the EU over the rule of law and has yet to strike a deal with the commission on unlocking its share of the bloc’s post-Covid-19 recovery fund.

Budapest was willing to agree to the minimum corporate tax earlier this year, before withdrawing its support in June.

Gergely Gulyás, Hungarian prime minister Viktor Orbán’s chief of staff, insisted on Thursday that the EU could not get the measure through unless his country agreed to it. The Hungarian finance ministry and government spokesmen could not immediately be reached for comment on Friday.

Additional reporting by Marton Dunai in Budapest and Mary McDougall in London

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