GOP works with Hungarian officials to strike new global tax deal

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Senior Hungarian officials say they are working with Republican lawmakers in the United States to defeat a global minimum tax backed by the Biden administration, as European and American leaders struggle to enact a groundbreaking international agreement targeting multinational corporations.

Peter Szijjarto, Hungary’s foreign minister, said this week he was taking the advice of GOP officials to resist the US-backed attempt to establish an international floor on corporate taxation, although the extent of this communication is unclear. With a right-wing government led by Prime Minister Viktor Orban, Hungary is effectively delaying the implementation of the tax deal in Europe, as each country in the European Union has veto power over the bloc’s tax deals. . All other EU member states support the proposal. The United States has yet to implement the deal either, amid a broader deadlock in Congress over President Biden’s economic agenda, and some Democrats are cautious about implementing the new rules. international taxes if the Europeans do not do so simultaneously.

The global compact, a longtime goal of Treasury Secretary Janet L. Yellen, would establish a minimum tax of 15% on large multinational corporations in a bid to halt the decline in corporate tax revenues collected by Western governments since decades. The Biden administration said the proposal was needed to ensure governments can fund social services and avoid a mutually damaging “race to the bottom” by nations to cut corporate tax rates to attract businesses. But those efforts have been strongly resisted by Republicans, who say the new rules include loopholes that will hurt the international competitiveness of U.S. businesses.

Yellen proposes a new global minimum tax

The deal appears to be in jeopardy due to roadblocks in Europe and in Congress. This dynamic is self-perpetuating: Several Hungarian officials have in recent days pointed to resistance to the plan among Republican lawmakers as a reason for Hungary to abstain, and U.S. opponents of the plan have in turn pointed to resistance to the plan. effort in Europe, hardening an impasse that the White House has not been able to resolve.

“We constantly consult with Republicans. There is constant professional consultation on this issue,” Szijjarto, a member of Orban’s government, said in an interview posted on Facebook. Hungary has one of the lowest tax rates in Europe. “We believe that the lower the taxes on labor and business, the more it helps in terms of competitiveness.”

The extent of the GOP’s collaboration with Hungarian officials was not immediately clear. GOP Representatives Adrian Smith (Neb.) and Mike Kelly (Pennsylvania), top members of the House Ways and Means Committee, sent a letter to the Hungarian ambassador last week congratulating that country for rejecting the deal global tax. The letter was published by Hungarian media and later confirmed by lawmakers’ spokespersons, who did not post it on their congressional websites or social media pages. Spokespersons for the two lawmakers said they were not in contact with Hungarian officials beyond the letter. Anti-tax crusader Grover Norquist also published a letter in June praising Hungarians, but said in an interview that he had not lobbied Hungarian lawmakers. Sen. Patrick J. Toomey (R-Pa.) also praised Hungary’s stance, though an aide to Toomey said the senator has not met with Hungarian officials. Toomey met with British, French and Irish officials to drum up opposition to the deal, the aide said.

American conservatives have forged close ties with Orban’s political movement in recent years, hailing Hungary as a bastion of traditional Christian values ​​that oppose immigration, gay rights and what the right calls “woke” liberalism. Fox News host Tucker Carlson broadcast from Budapest for a week last summer, meeting Orban and praising his government. “If you care about Western civilization, democracy and families, and the ferocious assault on those three things by the leaders of our global institutions, you should know what’s going on here right now,” said Carlson to viewers.

Former Vice President Mike Pence spoke at a conference on “family values” and demographics in Hungary last fall, and the Conservative Political Action Conference hosted a meeting in Hungary in May. Former President Donald Trump issued a formal endorsement of Orban ahead of this year’s Hungarian elections, which Orban’s party won more easily than expected.

“The Hungarian government is desperately seeking common ground with American Republicans, because Hungary’s international reputation in the West has never been worse. … Another topic is removing this global minimum tax,” Peter Kreko, director of the Hungarian Political Capital Policy Research and Advisory Institute, said in an interview. “They think the Republicans will come back to mid-term, then in the next presidential elections.”

The tax proposal consists of two elements – an overhaul of how large multinational companies, especially digital companies, are taxed and where they owe taxes; and a separate agreement on the minimum tax floor. Details of the digital tax deal, which many experts say requires the support of two-thirds of Congress to change US treaties, have not been offered. European and American leaders hope to quickly ratify the global minimum tax, and the Biden administration has argued that it can approve this part of the deal through the budget reconciliation process that allows Democrats to pass certain laws. with their only majority in the Senate, bypassing any Republican obstruction.

But Democrats are guaranteed control of the Senate for just a few months before midterm elections this fall, and Republicans would almost certainly roll back the minimum tax plan if they regain control of Congress. However, Europe’s inaction reinforces the reluctance of some American officials regarding the overhaul of the American tax code. General Electric lobbyist Lisa Wolski told a conference last month that it didn’t make sense for the United States to raise its headline tax rate before other countries passed their own minimum taxes, according to Tax Notes. Some congressional Democrats have raised similar concerns amid negotiations over a scaled-back economic package pushed by the Biden administration, according to two people briefed on the ongoing talks who spoke on condition of anonymity to describe private discussions.

As progress in Washington has stalled, Republicans have also sought to kill the deal’s momentum in Europe. In their letter, Smith and Kelly acknowledge that the president retains power over foreign policy and treaty negotiations. But they also say that US tax law can only be changed by congressional action.

“We question the caution around the world that is moving towards a system that forces countries to give up their sovereign fiscal authority,” the letter reads. The letter concludes: “We would like to offer a direct dialogue with Congressional Republicans as you consider Hungary’s position on the Global Tax Agreement.”

The comments were widely cited by Hungarian officials who are trying to derail the tax deal. Balazs Orban, Political Director of the Hungarian Prime Minister and Member of the Hungarian Parliament, pointed them to Facebook in a recent post. “It’s good to see that we are not alone,” said Balazs Orban.

Szijjarto, the Minister of Foreign Affairs, also said on facebook“Republicans in the United States are against this law. It was only yesterday that we received a letter from the Republican leaders of the House Tax and Trade Policy Subcommittees, from two Republican Representatives, in which they expressed their appreciation for our not supporting the global minimum tax.

A spokesperson for the Hungarian foreign minister’s office did not respond to a request for comment.

Liberal critics — and some conservatives — have attacked the GOP for working with the Hungarian government.

“I’m not surprised Republicans are doing everything they can to defend big multinational corporations, even if it means working against the interests of the US government to work with a foreign government,” said Frank Clemente, tax expert at Americans for Tax Fairness. , a left-wing group. “Their patriotism evaporates when it comes to protecting tax loopholes for multinational corporations.”

Added G. William Hoagland, senior vice president at the Bipartisan Policy Center and former Republican staff director of the Senate Budget Committee: “From the beginning, the Constitution was very clear that politics stops at the water’s edge. When we engage with individual legislators, it comes down to who is speaking on behalf of the United States government.

But other tax experts have defended GOP officials, saying their efforts reflect longstanding conservative concerns about a complicated and cumbersome new international tax regime. They also pointed out that lawmakers from both sides are in frequent contact with foreign officials about their policy priorities.

“Republicans have real concerns about this, and to the extent that they work with other people to explain their reasoning and make their case, I don’t blame them,” Daniel Bunn, an international tax expert at the Tax Foundation. , a centre-right think tank that has criticized the global tax deal. “If people have concerns about a policy and need to talk to other people about it, I think there is room for that. There are congressional delegations all the time talking to foreign officials about things that are going on.

Andras Petho in Budapest and Tyler Pager in Washington contributed to this report.

Laura T. Thrasher