The Biden administration said it will terminate its four-decade-old tax treaty with Hungary over that country’s resistance to implementing a global minimum tax, as the United States seeks to create a global tax floor for large multinational corporations.
In a statement on Friday, the Treasury Department said the United States is ending the treaty with Hungary because “the benefits are no longer reciprocal,” citing a loss of tax revenue for the United States and little return for American investment in the country. Hungary, which has one of the lowest corporate tax rates in Europe, is currently blocking the European Union’s implementation of the global minimum tax agreement.
The Biden administration has said the new global minimum tax will help states fund social programs and escape a mutually damaging “race to the bottom” by competing for business by lowering corporate tax rates. Those efforts have largely unified countries in the European Union, with Yellen and her partners winning over holdouts such as Ireland and Poland.
But Hungary’s resistance has become the latest major roadblock to implementing the plan, with Hungarian officials warning that the measure will hurt investment and growth in their country. The Washington Postthat Republican lawmakers, who also oppose the global tax deal, are working with senior officials in the Hungarian government.
“No matter how much pressure we are under … we do not risk the jobs of tens of thousands of Hungarians,” Peter Szijjarto, Hungary’s foreign minister, said in a Facebook post on Saturday. “We continue professional consultations on tax affairs with our Republican friends.”