U.S. terminates treaty with Hungary over resistance to global tax
GOP officials back Hungary’s resistance to global tax deal, bucking Biden
“The United States, across administrations, has had long-held concerns with Hungary’s tax system and the Hungary treaty,” the Treasury statement said. “We discussed these concerns with Hungary starting last fall, but are taking this step due to a lack of satisfactory action by Hungary to remedy these concerns.”
An analysis by the Treasury Department said the treaty unilaterally benefits Hungary. When the treaty was agreed to, Hungary’s tax rate was 50 percent; it is now 9 percent — less than half the U.S. rate.
Tax treaties are designed to help residents of countries that have signed them avoid paying taxes on the same income to both nations and to resolve other potentially complicated tax situations.
The Biden administration has said the new global minimum tax will help states fund social programs and escape a mutually damaging “race to the bottom” by competing for business by lowering corporate tax rates. Those efforts have largely unified countries in the European Union, with Yellen and her partners winning over holdouts such as Ireland and Poland.
But Hungary’s resistance has become the latest major roadblock to implementing the plan, with Hungarian officials warning that the measure will hurt investment and growth in their country. The Washington Post previously reported that Republican lawmakers, who also oppose the global tax deal, are working with senior officials in the Hungarian government.
“No matter how much pressure we are under … we do not risk the jobs of tens of thousands of Hungarians,” Peter Szijjarto, Hungary’s foreign minister, said in a Facebook post on Saturday. “We continue professional consultations on tax affairs with our Republican friends.”
The news that the tax treaty would be terminated was first reported by Reuters.