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Tax reform good news for lower earners

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Tax reform good news for lower earners
Reinhold Mitterlehner (L) and Chancellor Werner Faymann. Photo: APA/NEUBAUER
07:38 CET+01:00
Austria’s coalition government has agreed on a plan for wide-ranging reforms of the tax system, after three hours of negotiations on Thursday.

Details will be announced on Friday evening but in a brief statement late on Thursday Vice Chancellor Reinhold Mitterlehner (ÖVP) said around €5 billion would be cut from income tax.

Chancellor Werner Faymann (SPÖ) spoke of "the biggest tax reform of the Second Republic."

The outline of the reforms has already been made public and is being reported in the press. 

People with lower earnings will pay less income tax, with the initial income tax rate reduced from 36.5 percent to 25 percent on yearly incomes under €18,000.

The top tax bracket will increase to 55 percent, but only for those who earn more than €1 million a year.

Families with two children, on an average income, will receive a tax refund of around €1,580 a year (equal to the cost of the average summer holiday).

The reform is expected to be financed by clamping down on tax fraud, with additional savings made by reducing some tax write-offs, and higher taxes on capital gains such as stocks and real estate.

There will be no new inheritance or millionaires tax, one of the SPÖ's initial demands. 

The reforms will now be presented to the party committees for approval and are expected to come into force in January next year. 

Old Tax Model

  • 0 to €11,000 = 0%
  • €11,000 to €25,000 = 36.5%
  • €25,000 to €60,000 = 43.2%
  • From €60,000 = 50%

New Tax Model

  • 0 to €11,000 = 0%
  • €11,000 to €18,000 = 25%
  • €18,000 to €31,000 = 35%
  • €31,000 to €60,000 = 42%
  • €60,000 to €90,000 = 48%
  • €90,000 to €1 million = 50%
  • From €1 million  = 55%

There are also changes to capital gains tax, which may affect company shareholders, increasing the rate from 25 percent to 30 percent.

As far as is known, no substantial changes have been announced to social insurance at this time.

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