EUobserver: Hungary and Estonia blocking EU tax reform

Flags of Estonia and the European Union.
Flags of Estonia and the European Union. Source: Siim Lõvi /ERR

Estonian and Hungarian diplomats have blocked a revise set of EU tax rules - potentially derailing an effort to curb the race for ever-lower corporate taxes in the European Union, EUobserver reported on Monday.

The EU's Code of Conduct Group on business taxation has met behind closed doors and no notes have been taken, making it hard for lawmakers to access information or keep track of progress. The current rules were drafted in 1997 and have since then not been adjusted. 

International tax competition has become globalized and much more widespread compared with the late 1990s when lawmakers first drafted the rules, which have led EU countries to miss out on €160 billion in tax income annually, according to the Organization for Economic Cooperation and Development (OECD), EUobserver reported.

After years of mulling, member states have now put a new ruleset on the table, which has been called "unambitious, but at least a step forward."

On Tuesday, EU ministers of finance will vote on the proposal.

Chances for a breakthrough are low, with EU commissioner for economy Paolo Gentiloni publicly telling MEPs last week that Hungary and Estonia are the ones blocking the new rules - officially known as the Code of Conduct for Taxation. "If the vote fails, it shows how unanimous decision-making does not work," the adviser noted.

It is not clear what may have motivated Estonia and Hungary to block the new ruleset, but in parallel negotiations, Estonia and Hungary have also opposed a proposal for a global minimum tax. Estonia eventually did join the global minimum corporate tax initiative.

The OECD, the US and the EU want to implement a global minimum tax rate of 15 percent. In the EU, this proposal will come up for a vote on December 22.

Estonia and Hungary want to delay implementation, however. "Blocking the Code of Conduct may be a way of improving their negotiating position in the vote for a minimum tax," Chiara Putatouro, tax policy advisor at Oxfam international, told EUobserver.


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Editor: Kristjan Kallaste

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