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S&Ds: National vetoes must not be used as bargaining chips, the EU must overcome paralysing unanimity voting to deliver tax justice!


08 Jul 2022


Euro & Finance

The Hungarian government led by Viktor Orbán must immediately withdraw its veto on transposing the global deal on a minimum effective tax rate for multinationals into European legislation. National vetoes must not be abused and used for political bargaining. Another way forward – such as a transition to qualified majority voting in tax matters – must be found in order to overcome the paralysing impact of unanimity voting, which is stopping us delivering on our promises for tax justice. These are some of the key messages underlined by the S&D Group as the European Parliament today adopted a resolution that criticises national vetoes to undermine the global tax deal. The S&D Group spearheaded the negotiations for the resolution.

The implementation of a minimum effective corporate tax rate of 15%, as agreed at a global level by the OECD/G20 countries last October*, would yield €64 billion annually in additional, much-needed tax revenues for the EU. Now more than ever, additional financial resources are needed to cope with the implications of the Russian war against Ukraine, to fund the post-pandemic recovery and to realise the green transition. 

However, just after Poland withdrew its longstanding veto on the EU implementation of the deal, it is now Hungary blocking the agreement. This veto marks a third failed attempt by EU finance ministers to reach a consensus and seriously calls into question the viability of unanimity voting in tax policy, showing that it is not adapted to tackling the current tax challenges and delivering on tax justice for citizens.

Biljana Borzan MEP, S&D vice-president for economic matters, said: 

“Orbán needs to withdraw the veto on the global minimum tax for multinationals immediately and let the EU deliver tax justice for its citizens. National vetoes must not be used as bargaining chips, undermining progress in the union.

“All EU member states, including Hungary, already agreed on the deal at a global level. Our international partners, particularly the US, count on our promise to follow through and implement the minimum effective tax rate.

“These harmful national vetoes risk jeopardising our international commitments and damaging the credibility of the Union.”

Aurore Lalucq MEP, S&D spokesperson on taxation and European Parliament rapporteur on the implementation of the minimum effective tax rate for multinationals, in charge of the resolution, underlined:

“The EU has an obligation to deliver tax justice to our citizens. Each year, we lose up to €190 billion due to tax avoidance and aggressive tax competition. It is crucial for the EU to save the deal and find a way to adopt this legislation.

“To deliver on our commitments, to citizens and international partners alike, we need to move away from unanimity voting to qualified majority voting in tax matters. Tax matters are too crucial to be used as bargaining chips and we can no longer accept that Orbán is holding the rest of Europe hostage thanks to this veto.

“For too long, we seem to have surrendered our community values, but now is the moment to end this. That is why we advocate a move to qualified majority voting in tax matters. We are also asking the Commission to make use of Article 116** to overcome this unworkable situation and we are calling on member states and the Commission to consider the implementation of the global tax deal through a procedure of ‘enhanced cooperation’***.

“It’s high time we acted and used all the available tools at our disposal to deliver on our objectives.”

Read more about the S&Ds’ long-standing campaign for tax justice.


Note to editors:

*In October 2021, 137 countries across the world reached a historic deal to introduce a minimum effective corporate tax rate of 15%, which for the first time curbs tax competition between countries across the world.

It is important to stress that this is about the effective tax rate – the tax that is actually paid by the company, after taking into account all possible benefits or exemptions.

This global agreement, concluded under the OECD/G20 framework, now needs to be translated into the European law and into the legislative frameworks of all other signatories. Three failed attempts by the EU finance ministers mean that there is still no deal on its transposition into EU legislation.

**Article 116 of the Treaty on the Functioning of the EU refers to a provision in the treaties whereby unanimity voting can be replaced by qualified majority voting in instances where there are distortions to competition in the internal market.

***Enhanced cooperation is a procedure that enables a minimum of nine EU member states to cooperate in a particular field within the EU if the union as a whole cannot agree on such cooperation within a reasonable period. The procedure is designed to overcome stalemate where a particular proposal is blocked by one or more member states.

This procedure has been used several times, for example in the fields of divorce law and patents, as well as to protect the financial interests of the EU by setting up the European Public Prosecutor’s Office.