This time it wasn't Ireland wielding the veto. On Tuesday Poland, standing alone, blocked an EU directive implementing global minimum corporation tax rates of 15 per cent agreed between 137 countries at the Organisation for Economic Co-operation and Development (OECD).
Ireland, which has given up its long rearguard action on the issue, supported the measure, which will now return to the next meeting of finance ministers. Poland, which supports the minimum tax rates, says it requires legal assurances on simultaneous implementation of another part of the OECD agreement requiring the world's 100 biggest multinationals to declare profits and pay more tax in the countries where they do business. Warsaw backed the deal at the OECD.
Diplomats fear, however, that Poland has another agenda. Poland is engaged in negotiations with Brussels to unlock its €36 billion in loans and grants from the EU's Covid recovery funds, and there are strong suspicions, denied by Warsaw, that it is following through on a threat to block EU initiatives requiring unanimity if it doesn't get the funds. Commission president Ursula von der Leyen insisted on Tuesday that Poland does not yet fulfil the rule-of-law conditions required to receive pandemic funding, notably in refusing to reform the disciplinary regime for judges. She also signalled the commission's determination on the issue by announcing the activation of the EU's rule-of-law budget mechanism against Hungary to withhold EU funds for its rule-of-law breaches and democratic backsliding.
Poland’s blockage of the tax package is a serious blow to measures viewed by the majority of EU capitals as vital to tax-raising powers and to their economies. If it is also taking the issue hostage in a completely unrelated dispute, Warsaw is threatening to undermine the good-faith core of a vital pillar of the EU’s collective decision-making. Its fellow member states are being polite at this stage, avoiding public recriminations, but this is a strategy that will backfire. Goodwill, so vital to getting anything in Brussels, will quickly evaporate.