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Austria Split On Tax Reform

Monday, 01 July 2013   (0 Comments)
Posted by: Author: Ulrika Lomas
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Author: Ulrika Lomas

Austria's ruling coalition partners the Social Democrats (SPÖ) and the Austrian People's Party (ÖVP) remain clearly at loggerheads over plans and a precise timeframe for implementing a long-awaited tax reform in Austria. Despite acknowledging the importance of boosting Austria's competitiveness, the parties are split on how to achieve this key objective.

In a dual interview with Die Presse, Austria's Vice Chancellor and ÖVP leader Michael Spindelegger firmly ruled out the idea of a tax reform until at least 2016, when the budget is finally balanced, while Chancellor Faymann (SPÖ) insisted that a reform could take place earlier. Imposing a "millionaire's tax" on the country's super-rich, namely those individuals with wealth in excess of EUR1m (USD1.3m), will create vital scope to enable the Government to overhaul the tax system much sooner, Faymann explained.

Vice Chancellor Spindelegger reiterated the party's vehement and steadfast opposition to the idea of either raising taxes or introducing new taxes in Austria, either in 2014 or in the next legislative period. In order to be competitive, Austria needs less taxes, less state, and more businesses that create jobs, he made clear, underscoring the need to promote entrepreneurship and to create a business-friendly environment.

Echoing these views, Austria's Finance Minister (ÖVP) Maria Fekter stressed the need to remove the current imbalances in the tax system and to significantly reduce taxes and levies. Fekter nevertheless emphasized that the budget must first be stabilized, as a matter of priority.

The tax on labor is too high, Fekter argued. Furthermore, there is currently no "adequate tax relief" accorded to families in Austria, the Austrian Finance Minister pointed out. Here, Fekter alluded to the system in Germany, where a child allowance of EUR7,008 is granted, and said that such a measure should be introduced in Austria, once the budget is consolidated.

Concluding, Fekter ruled out the idea of introducing a flat rate of tax of 25 percent, as advocated by the Alliance for the Future of Austria (BZÖ), warning that this "is not the right way," and would cost EUR20bn. This would simply be the biggest tax relief for millionaires that the Republic has ever seen, Fekter ended, highlighting the fact that millionaires currently pay 50 percent tax.



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