There have already been questions in professional circles about the legality of the Biden administration’s decision to terminate the tax deal between Hungary and the US without consulting the legislature.
The Republican members of US Senate committees responsible for tax matters have drafted a joint letter to US Secretary of Treasury Janet Yellen on the termination of the 1979 Bilateral Tax Treaty between Hungary and the United States. In the letter, they complained about the failure to consult with the legislature and the government’s use of the treaty as a diplomatic pressure tactic since its denunciation could be directly linked to the fact that Hungary is the only member state to have prevented the EU from adopting the global minimum tax.
As Hungary Today reported earlier, the bilateral agreement was terminated by the US some 4 months ago. Hungarian Foreign Minister Péter Szijjártó said at the time that the reason for the incident was Hungary’s opposition to the introduction of a global minimum tax and the tax increase it would entail.
The idea of a global minimum tax originates from the United States, and was proposed by the Biden administration. Even the European Union wants to adopt the tax and wants to circumvent Hungary’s veto by adopting a different procedure for the proposal.
Returning to the cancelled Hungarian-US treaty, Gergely Czoboly, a tax expert at PwC Hungary, told Világgazdaság, a Hungarian economic news site, that there had already been some debate in professional circles about the legality of cancelling the treaty without seeking Senate approval.
While the treaty cannot be put into force without the Senate’s support, would the government’s decision be sufficient to denounce it?”
the expert asked. Gergely Czoboly added that the question is actually whether the Treasury Department, which exercises executive power, has taken over the role of the legislature in this case, when it effectively removes a tax treaty from the US legal order on a par with the law.
One solution to the situation, the expert says, is for the US to withdraw the notice of termination. Another solution would be to use a convention negotiated in 2010 but not ratified by the US legislature since then, but this would be legally complicated.
If no agreement is reached, the treaty will expire on 1 January 2024. But the future is also greatly influenced by the fact that the US holds mid-term elections on Tuesday, which could significantly change the balance of power in both houses of the legislature.
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