Austria to pass tax reforms amid protests

Austria to pass tax reforms amid protests
Not everyone is happy about the VAT increase. Photo: APA/Hans Klaus Techt
Austria’s new tax package is due to be passed in Tuesday's cabinet meeting, in a move which will slash personal income taxes by €5 billion, as part of what the coalition government described as the biggest post-war fiscal reforms in the country.

The reforms aim to boost sluggish economic growth by lowering tax rates on low and middle incomes.

Around 40 laws will need to be altered and the reforms will only come into force in 2016.

People in the lowest income bracket will only have to deduct 25 percent in taxes, down from the current 36.5 percent.

The government plans to finance the reform by fighting tax evasion, closing tax loopholes and raising the tax rate to 55 percent for the top income bracket.

Each taxpayer is expected to be levied an average of €1,000 less a year. Tax rates on capital gains and non-wage income will however remain unchanged.

Consumers and retailers will have to finance the reforms, with the lowest rate imposed on goods and services to be raised from 10 to 13 percent.

The Farmer’s Union is appealing against the proposed tax increase on feed, seeds, flowers and live animals, and the tourism industry has announced plans to protest against the proposed VAT increase on hotel rates. 

Around 500 publicans and bed and breakfast owners gathered in front of the Chancellery on Tuesday morning and marched in protest against increased taxes on their businesses – calling the government the "gravedigger of the tourism industry". 

The real estate industry expects prices for apartments and houses to increase, mainly because of the increase in property tax from the current 25 percent to 30 percent.

The government also expects to claw back some €1.9 billion in lost taxes through tighter checks on cash transactions.

In addition, some tax perks including those on company cars would be scrapped – a move expected to lead to €900 million in levies.

The government is not only under pressure to deliver economic results, but also to gain voter confidence, as the far-right Freedom Party is leading in some of the latest opinion polls.

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