“If we were under qualified majority voting, we would have a new taxation system years ago”, concluded French Finance Minister Bruno Le Maire during the public debate of his last Ecofin Council as president on Friday 17 June.
This after the EU Council failed once again to reach agreement on the directive implementing Pillar II of the OECD agreement on international minimum taxation of companies. After Poland’s repeated refusal for several months, it was now Hungary’s turn to veto (see EUROPE 12959/10).
To solve the problem with Poland, which asked for a stronger link between Pillar I and Pillar II, the French Presidency of the EU Council added a revision clause to Pillar I on digital taxation. This is dependent on an international convention at OECD level, which cannot be signed in the immediate future.
The European Commission has therefore undertaken to present a report to the EU Council by 30 June 2023 at the latest, assessing the situation regarding the implementation of the first pillar. If necessary, the Commission will present a legislative proposal to address these fiscal challenges in the absence of the implementation of the first pillar solution.
The Polish minister, Magdalena Rzeczkowska, welcomed the change in the text and thanked the Presidency for its work. “The Commission will continue to monitor international negotiations”, said Paolo Gentiloni, Commissioner for Economy.
So it was the Hungarian minister, Mihály Varga, who blocked the directive this time. “The EU economy is facing major challenges, and attention must be paid to the consequences of the war”, he explained, mentioning inflation in food and energy prices. For him, “the consequences of the war are likely to create serious damage to the EU economy”, and he therefore said he believed that the work was not ready.
Mr Le Maire recalled that Hungary had given its agreement when the war had already started and that the scheduling difficulties Hungary had encountered in March had been resolved (see EUROPE 12911/16). He also stressed that the European Commission’s evaluation report shows that the implementation of this directive is beneficial for the European economy.
Oscillating between annoyance and irony, Mr Le Maire was philosophical about the rebound of the Hungarian veto. Quoting Aristotle: “surprise is the test of true courage, and courage we do not lack”, he assured the press conference following the meeting.
The minister said he was optimistic that an agreement could be reached before the end of the French Presidency on Thursday 30 June.
However, he insisted on the need to move from unanimity to qualified majority voting on many issues, including taxation, especially to compete with other powers. He mentioned the words of French President Emmanuel Macron on the urgent need to simplify the decision-making process at European level.
Asked how this measure could be implemented, given that such a treaty change would itself require unanimity, Mr Le Maire said that “there is no technical solution that does not have political will”. (Original version in French by Anne Damiani)