U.S. Treasury to end 1979 treaty with global minimum tax holdout Hungary

WASHINGTON, July 8 (Reuters) – The U.S. Treasury said on Friday it was set to end a 1979 tax treaty with Hungary following Budapest’s decision to block the Union’s implementation European Union of a new global minimum tax of 15%.

A Treasury spokesman said that since Hungary lowered its corporate tax rate to 9% – less than half the US rate of 21% – the tax treaty unilaterally benefits Hungary.

“The benefits are no longer reciprocal – with a significant loss of potential revenue for the United States and little return for American business and investment in Hungary.”

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The timing of the termination after years of US concerns over the treaty suggests that the Treasury is using it to try to pressure Hungarian Prime Minister Viktor Orban into agreeing to implement the global minimum tax of 15 % agreed by almost 140 countries. Read more

Affirming the Hungarian government’s position, Foreign Minister Peter Szijjarto said the global minimum tax would ruin Europe’s competitiveness and put jobs in Hungary at risk.

“Based on all of this – no matter how much pressure is put on us – we obviously do not support the introduction of the global minimum tax in Europe,” he said on Facebook on Saturday. “And we continue our professional consultations on tax issues with our Republican friends.”

Termination of the treaty is expected to be completed within six months after the US Treasury sends formal notification to Hungarian authorities.

“Hungary has aggravated the US government’s long-standing concerns over the 1979 tax treaty by blocking the EU directive to implement a global minimum tax,” the Treasury spokesman said. “If Hungary implemented a global minimum tax, this treaty would be less one-sided. Failure to do so could exacerbate Hungary’s status as a treaty-trading jurisdiction, further disadvantaging the United States.”

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Reporting by David Lawder, additional reporting by Anita Komuves in Budapest; Editing by Nick Macfie and Emelia Sithole-Matarise

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