Hungary and Poland hold up EU decisions on oil and corporate tax

Delay risks slowing momentum for global OECD levy deal ahead of crucial midterm elections in the United States

Two high profile European Union (EU) decisions are in limbo due to the opposition of Hungary and Poland. The two governments have respectively prevented the bloc sanctioning Russian oil or agreeing on a minimum 15 per cent corporation tax.

On Tuesday Polish objections to a tax floor for large multinational corporations again prevented EU finance ministers from signing off on the agreement, risking potential knock-on effects in delaying the international implementation of a global deal, while Hungary ruled out using a meeting of national leaders next week to break the impasse on sanctioning Russian oil.

Funds

Both Hungary and Poland are in dispute with the rest of the EU over democratic backsliding, which has delayed the European Commission from releasing EU funds due to the rule of law concerns.

This has led to suspicions that Warsaw and Budapest are using their vetoes as leverage to pressure Brussels into releasing the cash.

After a meeting of finance ministers failed to break the deadlock on corporate taxation on Tuesday, French economy minister Bruno Le Maire insisted it would be possible to reach agreement on the digital tax before the country hands over the rotating EU presidency to the Czech Republic at the end of June.

He said he was “convinced” that “we will have an agreement with Hungary and Poland” by the time the finance ministers meet again on June 17th.

“We are heading towards a consensus on the minimum level of corporate taxation,” Mr Le Maire said. “This is about justice. If we want to fight against aggressive tax planning and tax evasion, we need to have this . . . It’s in all our interest to avoid these practices, which destabilise Europe.”

Supporters of the Organisation for Economic Co-operation and Development (OECD) deal were hoping that a swift agreement in the EU would add to momentum to help it pass through the United States Congress before November midterm elections, when tax-sceptic Republicans may take control.

Approval

Warsaw has said that it wants the approval of the 15 per cent minimum to be legally linked to a separate agreement about the taxation of the world’s largest multinational companies, a request for something EU officials have said is not possible.

The talks with Poland came in the wake of a ruling by the European Court of Justice that found the Warsaw government interfered with the independence of its judiciary, leading the commission to pressure Poland to rectify the situation before funds could be released.

Meanwhile, Hungary's prime minister Viktor Orbán, who granted his government extraordinary powers on Tuesday by declaring a state of emergency due to the war in Ukraine, has reportedly refused to discuss sanctions on Russian oil at an upcoming meeting of national EU leaders.

There had been hopes that the leaders would be able to reach agreement on the EU's sixth sanctions package on Russia when they meet at a European Council next week, allowing the bloc to jointly agree to phase out imports of Russian oil three weeks since it was first proposed by the European Commission.

Energy

Hungary has been offered a year-long phase in time and assistance to adapt its energy system but has maintained its opposition, objecting that the economic cost to its citizens would be too high.

Earlier this month the Conference on the Future of Europe, a year-long initiative to consult citizens about potential EU reform, recommended removing the requirement for the unanimous agreement of the 27 member states for some decisions.

A European Commission spokeswoman said the executive would support this proposal. “Indeed, it would be useful to look at areas where whether it would be good to to go to a qualified majority voting,” said deputy chief spokeswoman Dana Spinant.