Austrian Anger Over Faymann's Bank Tax Plans
29 May 2013
Posted by: Author: Ulrika Lomas
Source: Ulrika Lomas (Tax-News.com, Brussels)
During a recent ministerial council meeting, Austrian Chancellor Werner Faymann underscored the need for the country's bank levy to be extended, sparking anger among his opponents.
Alluding to the bank levy as a "hard but necessary, and a justifiable contribution," Chancellor Faymann insisted that extending the levy is far preferable to increasing the fiscal burden on employees, families, and pensioners in Austria, via the introduction of additional savings packages.
Studies conducted by the Austrian Chamber of Labor and by the National Bank show that the existing bank levy has not simply been passed on to customers, nor has it lead to a slump in the volume of lending, Faymann argued, underlining his optimism that his arguments would ultimately "convince" coalition partner the Austrian People’s Party (ÖVP).
Chancellor Faymann's latest remarks have, however, provoked fierce outrage and vehement oppsition, not only among Austria's Opposition parties, but also among leading ÖVP members and industry representatives.
President of the Federation of Austrian Industries (IV) Georg Kapsch warned that prolonging the levy will merely serve to make financing the real economy much more difficult, particularly given the highly sensitive economic climate. Any additional costs are likely to be passed on to customers and to borrowers, and to impact on businesses in Austria, Kapsch made clear.
Highlighting the fact that the tax burden on Austrian banks, in relation to gross domestic product, is already ten times greater than the burden on banks in Germany, Kapsch explained that this gives Austrian banks a significant competitive disadvantage in Europe. In 2011, the bank tax yielded EUR509.9m (USD656m) in Austria, and EUR590m in Germany, the IV president pointed out. Kapsch stressed that it is completely incomprehensible that the bank levy is not imposed on profit, but on the balance sheet of a bank, adversely affecting institutions, irrespective of whether or not they realize a small profit or any profit at all.
Concluding, Kapsch noted that, in addition to the bank tax and increased own capital requirements, Austrian financial institutions are also required to pay a special contribution of 25 percent to the Government between 2012 and 2017, under the terms of the country's Stability Law. The product of this contribution flows to a special fund managed by the Austrian Finance Ministry, to support and secure the long-term survival of the Austrian Volksbank (ÖVAG).
The bank levy was introduced in Austria in January 2011. Banks with a balance sheet of between EUR1bn and EUR20bn are taxed at 0.055 percent, while banks with a balance sheet in excess of EUR20bn are subject to a rate of tax of 0.085 percent a year.