Hungary has said “no” to the global minimum tax, which led the US to break its double tax treaty with the country. Now the UK may also back out, but the Americans are less likely to dare take such a hard line.
In Britain, there is a big race for the prime ministership after Boris Johnson resigned in the summer. The two Tory candidates are former Chancellor of the Exchequer Rishi Sunak, and Secretary of State for Foreign, Commonwealth, and Development Affairs Liz Truss.
The politicians are trying to outbid each other in the race, and both are calling for major tax cuts in the country, which run counter to the ideas of big powers like the US, Germany, and France, who are working to introduce a global minimum tax.
Until now, the British have also been in favor of a global minimum tax, and have been one of the main backers in the Organization for Economic Co-operation and Development (OECD) negotiations. However, the candidates in the election promise low taxes, which could easily turn the UK from the frontrunner of the global minimum tax into its opponent, Gergely Czoboly, tax expert at Jalsovszky Law Firm, pointed out to the Világgazdaság economic portal.
However, there are those who strongly oppose the new tax. Hungary, for example, has vetoed the introduction of a global minimum tax in the European Union, which has stalled negotiations. The EU is now reportedly considering how to introduce the tax without the Hungarians, but this could be illegal, according to the tax expert.
The Hungarian veto has not been without retaliation, as the US has terminated the double taxation treaty with Hungary as a result. This makes one wonder whether the Biden administration will apply similar political pressure on the UK.
The answer lies somewhere in the middle, the tax expert points out: on the one hand, the Americans cannot be expected to take such firm diplomatic action against the British. On the other hand,
the Biden administration’s already not so bright domestic political prospects would be significantly damaged if the UK were to withdraw from the OECD deal, and a certain degree of political pressure cannot be ruled out.
According to Gergely Czoboly, the UK already has a more limited influence on the EU’s adoption of the global minimum tax, but the effects of the tax could be felt by UK firms even if the island nation does not introduce it. This also means that developments in the EU could easily force the UK to take action.
Featured photo: Pixabay