US cancels decades-old agreement with Hungary over Orbán’s opposition
The US Treasury on Friday said it was moving to terminate a 1979 tax treaty with Hungary. It is in the wake of Budapest’s decision to block the European Union’s implementation of a new, 15 percent global minimum tax. The timing of the termination following years of US concerns about the treaty is noteworthy. It suggests that the Treasury is using it to try to pressure Hungarian Prime Minister Viktor Orbán to agree to implement the 15 percent global minimum tax. An agreemnet accepted by nearly 140 countries. Continue reading below for more information on the subject.
Decades-old agreement up in flames
Reuters reports from Washington on 8 July, that The US Treasury on Friday said it was moving to terminate a 1979 tax treaty with Hungary in the wake of Budapest’s decision to block the European Union’s implementation of a new, 15 percent global minimum tax. A Treasury spokesperson said that since Hungary lowered its corporate tax rate to 9 percent. That is less than half the 21 percent US rate. Conclusively, this means that the benefits of the tax treaty unilaterally benefit Hungary and no longer benefit the United States.
The agreement in question was a regulation on the proclamation of the Convention between the Government of the Hungarian People’s Republic and the Government of the United States of America. It was for the avoidance and prevention of double taxation in the field of income taxes. The agreement was in effect from 12 February 1979, writes Jogtár.hu, until now.
Comments from the US Treasury
“The benefits are no longer reciprocal. With a significant loss of potential revenues to the United States and little in return for US business and investment in Hungary,” says the treasurer. The termination is expected to be completed in six months after the Treasury sends a formal notification to Hungarian authorities.
“Hungary made the US government’s longstanding concerns with the 1979 tax treaty worse. Worse by blocking the EU Directive to implement a global minimum tax,” the Treasury spokesperson continues. “If Hungary implemented a global minimum tax, this treaty would be less one-sided. Refusing to do so could exacerbate Hungary’s status as a treaty-shopping jurisdiction, further disadvantaging the United States.”
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Source: Reuters, jogtár.hu