Estonia and Hungary block EU tax reform / Article

The current EU tax framework was developed in 1997 and has not been adapted to the new situation of the 21st century since then.

Compared to the end of the last century, countries are now competing much more vigorously, offering favorable conditions to global companies.

The Organization for Economic Co-operation and Development (OECD) estimates that EU Member States are losing € 160 billion in tax revenue a year.

The meetings of the Code of Conduct Group on EU Tax Policy have been held in camera, without remarks, allowing Members of the European Parliament to evaluate the information and follow the negotiations.

After years of debate, Member States have developed a new set of rules, described by a policy adviser who wished to remain anonymous as not very ambitious, but at least as a “step forward”.

However, the tax reform developed by the Committee of Ambassadors of the Member States has been rejected.

EU finance ministers are expected to vote on Tuesday.

However, the chances of approving tax reform are slim, as EU Economic Commissioner Paolo Gentiloni told MEPs last week that Estonia and Hungary are blocking the new rules.

Estonia’s and Hungary’s arguments are unknown, as the talks took place behind closed doors, but in parallel talks, both countries also oppose the global minimum corporate tax of 15%, which the OECD, the US and the EU want to introduce.

The EU is expected to vote on such a global tax on 22 December.

Chiara Putatouro, a tax policy adviser at Oxfam, said Estonia and Hungary wanted to improve their negotiating position ahead of the vote on a global minimum corporate tax by blocking EU tax reform.

Martin Nauven, an associate professor of law at the University of Leiden, recently analyzed 2,500 confidential documents from the Code of Conduct Group, concluding that it is not only opaque but also ineffective.

According to him, the EU tax regulation does not prevent tax evasion, and Member States are reluctant to incorporate it into their national laws.

In an interview with the German edition of Der Spiegel, Nuvens said that if the EU did adopt a tax reform on Tuesday, it would not correct the shortcomings that are widely used in accounting manipulation.

Companies will still be able to avoid setting up so-called letterbox companies in low-income countries.

In addition, the new rules will apply to countries, not people, even though countries are competing to attract wealthy people.

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