Poland on Thursday delayed the European Union’s formal adoption of a minimum corporate tax for large companies and, by extension, also blocked a whole package of other deals, including funding for Ukraine in 2023, according to diplomatic sources.
The minimum tax, along with 18 billion euros ($19 billion) for Ukraine next year, the approval of Hungary’s recovery plan and the suspension of some EU budget funds for Budapest were part of a complex agreement reached by EU governments on Monday evening.
The pact was due to be signed in what is called a “written procedure” before Wednesday, but Poland has twice demanded an extension of the deadline for it, the latest of which is now at 12:00 (1100 GMT) on Thursday.
“No one understands that the package as a whole is being held up because of Polish issues with the global tax,” an EU diplomat said. “We have no idea what (Polish Prime Minister Mateusz) Morawiecki, who already accepted the tax in the spring, wants or will do,” the diplomat said.
EU diplomats speculated that Warsaw may be holding the entire package hostage to get a clear commitment from the rest of the 27-nation bloc that Poland would get the tens of billions in EU recovery funds now blocked by a dispute over the rule of law with Brussels.
“On Monday we heard that they needed time for the justice minister to agree. We are not sure how these extensions intertwine with what is happening with him and with the measures presented to Parliament on judicial independence,” said a diplomat.
The issue is likely to come up at the EU leaders’ summit in Brussels on Thursday.
The 15% global minimum corporate tax was agreed by 140 countries of the Organization for Economic Co-operation and Development in 2021 to prevent large international companies from shifting their profits around the world in order to reduce their tax bill and erode thus the tax bases of the countries.
The minimum tax will apply to companies with an annual turnover of at least 750 million euros and each EU country must incorporate it into its national legislation before the end of 2023. Large companies will have to pay the minimum rate from 2024 .