Poland and Hungary block EU agreement on minimum tax for large companies

The European Union’s (EU) effort to implement an internationally agreed minimum tax on large multinationals was met with opposition from Poland and Hungary.

EU members are still seeking to sign into law a landmark agreement among OECD countries that obliges governments to impose a minimum 15% tax on the world’s biggest companies.

Under France’s recently launched six-month rotating presidency of the European Council, the EU intends to be the first jurisdiction to implement the agreement, in time for its application on January 1, 2023.

But this would require the unanimous approval of the members of the bloc, and Poland led a small group of countries with a varied list of doubts about the way forward,

The resistance of Poland and Hungary comes at a time of clear tension in the relationship between these two countries and their EU partners, who consider that the governments in Warsaw and Budapest are moving away from the democratic values ​​of the bloc.

The global minimum tax is only one part of the OECD agreement, and the focus of criticism from the two countries is that the other key part, the so-called “number one pillar”, must be implemented at the same time.

That part envisions a highly complex deal that would see companies taxed where their profits are made and goes to big tech groups, but it has yet to be fully finalized.

“Poland cannot support a unilateral EU introduction of a global minimum tax, reducing the EU’s competitiveness, leaving behind pillar one.”Poland’s deputy ambassador to the EU, Arkadiusz Plucinski, told a meeting of European finance ministers.

“To do this, we insist on our proposal… which is to legally link the two pillars”, he stated.

In turn, the Hungarian Finance Minister, Mihaly Varga, declared that he would not address the other pillar “would jeopardize political influence over third countries to effectively implement” the deal.

Meanwhile, Bruno Le Maire, the French finance minister who is spearheading the proposal, defended the two-track approach.

France expects a final deal on the minimum tax in early March, just weeks before presidential elections in which President Emanuel Macron is a likely candidate.