Hungary and Ireland build front to say no to EU tax harmonisation plan

Viktor Orbán, Hungarian Prime Minister, at a 2015 event in Brussels, Berlaymont. (Copyright: European Union , 2015; Source: EC - Audiovisual Service; Photo: Lieven Creemers)

Viktor Orbán, Hungarian Prime Minister, at a 2015 event in Brussels, Berlaymont. (Copyright: European Union , 2015; Source: EC – Audiovisual Service; Photo: Lieven Creemers)


After last week, any effort from the European Union to harmonize corporate tax rules across the bloc will have to deal with a new opposition front. Last Thursday, Prime Ministers from Hungary and Ireland met separately in Budapest and expressed a firm rejection to any plan from Brussels to finetune regional tax regulations, saying that such moves would damage competition in the single market. The two leaders, who run two of the countries with the lowest corporate taxation in the 28-member bloc, also shared common views on other European affairs and are likely to lead a sort of “no front” in the future.

Background

Since the early 2000s, there has been a wider debate in the European Union on whether tax rates should or should not be harmonised across the region. Indeed, from a tax-policy standpoint, the European Union does not exist as a single market, and the 28 EU member states still operate their own national corporate income taxes. Despite a long history of initiatives and plans around the harmonisation of corporate income taxes within the bloc in the past 15-18 years, co-ordination between member states is still very minimal and corporate taxation rates of around 9% coexist with 35% peaks.

Major tax reform

The focus on tax harmonisation has been at the centre of the EU’s current executive branch, with direct plans to prevent tax avoidance by business players – mainly large scale firms – operating in the EU. In 2016, on October 25, the European Commission announced the intention to proceed with a major corporate tax reform, to overhaul the way in which companies are taxed in the Single Market, “delivering a growth-friendly and fair corporate tax system”.

An official EU statement explained publicly that the EU’s plan was to create a Common Consolidated Corporate Tax Base (CCCTB), a sort of level-playing field for multinationals in Europe, “by closing off avenues used for tax avoidance”. Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs said: “Companies need simpler tax rules within the EU. At the same time, we need to drive forward our fight against tax avoidance, which is delivering real change”.

Internal disagreement

However, it’s not a secret that, for some EU member states, tax competitiveness has become a key success factor for attracting big multinational companies and so for strong economic growth. Countries such has Ireland, the Netherlands and Malta especially, with some of the lowest corporate tax rates in the region, would clearly find the introduction of the CCCTB definitely not convenient. For this reason, when Viktor Orban and Leo Varadkar, leaders of Hungary and Ireland respectively, spoke to reporters in Budapest at the end of their meeting last Thursday and rejected any effort to harmonise corporate and other tax rules across the EU, they did not surprise anyone.

Firm rejection

“Taxation is an important component of competition”, Hungarian Prime Minister Viktor Orban said. “We would not like to see any regulation in the EU, which would bind Hungary’s hands in terms of tax policy, be it corporate tax, or any other tax,” Mr. Orban also said. “We do not consider tax harmonization a desired direction”, he added.

Ireland’s Taoiseach Varadkar echoed him and said the two leaders agreed that the European economy was strongest where there was competition among member states. “We share a view as governments that we should continue to have competition among member states in terms of tax policy”, Mr. Varadkar said. “We are very much of the shared view that countries should set their own taxation rates. Both for corporation taxes and income taxes”, he added.

Hungarian-Irish front

Hungary and Ireland are amongst the countries with the lowest corporate taxation in Europe. Hungary, which made foreign investment the key-element to power its economy in recent years, runs indeed the EU’s lowest corporate tax rate at 9%, while Ireland’s 12.5% rate is also among the lowest in the 28-member bloc. According to the joint press conference given in Budapest last week by Irish and Hungarian Prime Ministers, Ireland and Hungary also shared common views in several European affairs, such as budget, enlargement and Brexit.

The decision by Ireland’s PM – who has anyway said his views on other points such as migration still diverge from those of his Hungarian counterpart – to meet with Mr. Orban last week, looks like a direct consequence of the plan by the Commission to bolster a CCCTB. Finance Commissioner Pierre Moscovici is actually one of the main backers of the plan, and his words last November, when he called for member states to adopt a CCCTB in an effort get transparency on taxes, sounded like a direct warning for the Irish government.

Next steps

Although the idea of CCCTB emerged almost seven years ago as a draft directive and already collapsed several times, tax harmonisation within the EU is a topic that is by all means gaining momentum. The “French front”, with Commissioner Moscovici championing the proposal and the plan by French President Emmanuel Macron to tax digital companies based on revenues generated in EU countries, is indeed pushing for a change, and it looks that it will eventually bring results. According to Reuters, last November Mr. Pierre Moscovici said that the Commission was considering using extraordinary powers to strip EU states of their veto power on tax matters to break resistance over blocked legislation.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the European Sting Milestones

Featured Stings

Stopping antimicrobial resistance would cost just USD 2 per person a year

Parlamentarians to “break up” with reality in the Google antitrust case

EU’s guidelines on net neutrality see the light although grey areas do remain

The US banks drive the developing world to a catastrophe

“Health and environment first of all”, EU says with forced optimism after 7th round of TTIP talks

Germany readies to pay for the Brexit gap in EU finance

China Unlimited Special Report: The trip to China

COP21 Breaking News_03 December: UNFCCC Secretariat Launches Forest Information Hub

Time to be welcome: Youth work and integration of young refugees

EU to negotiate an FTA with Japan

Ukrainian civil war: Is this the beginning of the end or the end of the beginning?

Turkey to let EU alone struggle with the migrant crisis while enhancing its economic ties with Russia instead?

IQ scores have been falling for decades, new study finds

“As German Chancellor I want to be able to cope with the merger of the real and digital economy”, Angela Merkel from Switzerland; the Sting reports live from World Economic Forum 2015 in Davos

EU-Turkey relations: Will Turkey manage to revive the EU accession process talks?

Armenia should take vigorous measures against entrenched corruption

Virtual Doctor: a core part of modern healthcare?

‘Jerusalem is not for sale’ Palestinian President Abbas tells world leaders at UN Assembly

G20 LIVE: G20 Leaders’ Communiqué Antalya Summit, 15-16 November 2015

Eurozone: Inflation plunge to 0.4% in July may trigger cataclysmic developments

World response to AIDS epidemic at a ‘critical juncture’

On International Youth Day the European Youth Forum calls for true youth participation

Time is running out to protect Africa’s forests

EU Commission: Growth first then fiscal consolidation

Plastic Oceans: MEPs back EU ban on polluting throwaway plastics by 2021

Chinese economy to raise speed and help the world grow

Why social working cultures are happier and more productive

Remembering Kofi Annan

Half of all mental illness begins by the age of 14

EU to increase spending and improve delivery of education in emergencies and protracted crises

An alternative view of Globalization 4.0, and how to get there

UN says ‘many humanitarian achievements’, one year after ouster of ISIL from Mosul

The movement of anti-vaccers: taking humanity back 200 years

Apple’s tax avoidance scheme remains as creative as their new iPhone

Europe turns out more jobs this summer

Politics still matter in the US but not in Europe

Mali: Presidential elections critical to consolidate democracy, says UN peacekeeping chief

Youth and Participation: are the people rising up in Spain? 


Legal Manager – 2050

How to provide health education and thus create better health systems

Road injuries leading cause of death for the young, despite safety gains: UN report

UN condemns ‘heinous’ suicide attack on education centre in Afghanistan

The shrinking Arctic ice protects us all. It’s time to act

New skills needed for medical students in Industry 4.0

Transition between education and employment: how the internship culture is threatening the foundations of our education

Eurozone: Retail sales and inflation point to recession

Why do medical curricula shouldn’t neglect the Sustainable Development Goals

Why medicine is relevant to the battle against climate change

Fisheries: Commission proposes measures to conserve stocks of deep-sea species in the North-East Atlantic

Syria: Guterres concerned over reported attacks in Idlib, calls for ‘full investigation’

Discovering Europe: Free EU rail pass for 18 year olds

Want a fairer society? This economist says he has the answer

The banks first to benefit from the new euro trillion ECB plans to print

These European countries produce the most plastic waste per person

Storms and snow in Lebanon worsen plight for Syrian refugees

Better protection against non-cash payment fraud

Can big events really go plastic-free? A water capsule made from seaweed may be the answer

‘Collective amnesia’ over causes of global financial crash – human rights expert

Superbugs: MEPs advocate further measures to curb use of antimicrobials

Why are the Balkans’ political leaders meeting in Geneva this week?

UN chief appoints Luis Alfonso de Alba as Special Envoy for the 2019 Climate Summit

More Stings?

Comments

  1. Need a loan to buy or start a business? Advertisement from BURTON LOAN FIRM a loan/financing company offering Business loan, Personal loan, Property or Real Estate loan at an interest rate as low as 2 – 3% annually. Contact us for more info.
    Email: burtonloanconsults@gmail.com

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s