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Austria unveils €2 billion relief package to fight rising cost of living

There will be changes to the commuter allowance and increasing public transport investments, but the package has also been criticised.

metro in austria station mask men
Austria has decided on a relief package for residents. (Photo by ALEX HALADA / AFP)

As the cost of living increases in Austria and Europe in general, governments scramble to halt inflation and galloping energy prices. Austria this weekend unveiled a package with some €2 billion promised as a relief for citizens. 

The primary measure is a reduction in taxes on natural gas and electricity by the end of June 2023, which is expected to cost €900 million and should cut tax by 90 per cent.

Additionally, there will be a 50 per cent increase in the commuter allowance and an increase in the “commuter euro”, which reduces income tax levies by €2 per kilometre distance between the place of residence and workplace. These should cost €400 million.

READ ALSO: UPDATED: How to save money on fuel costs in Austria

The package includes a €150 million investment in public transport to increase offers and lower prices. However, the government hasn’t given any specific details on these proposals.

Some €120 million will be spent in helping self-employed, small and medium-sized companies with high fuel costs switch to more sustainable energy sources. Finally, a further €250 million is set to be invested in wind and solar power generation.

One-off payments

This is the second relief package announced in less than 30 days by Austrian authorities.

The country’s National Council approved late last month one-off payments to ease the current cost of living crisis for specific households in the country.

Almost every Austrian who earns no more than €5,670 per month will receive a voucher for €150 euros to cushion the increased energy bill. Low-income people should get €300 after the €1.7 billion expense was approved.

READ ALSO: Cost of living: Petrol crosses €2 per litre in some parts of Austria

Coalition talks

It has taken a lot of negotiation and persuasion to reach an agreement between both coalition members, several Austrian media sources reported.

ÖVP spokespeople stated that their junior partners, the Greens, were reluctant to provide any financial support to drivers. A reduction in VAT on fuels was also off the table because it wouldn’t be allowed under European law, Kurier said.

“The targeted measures don’t provide relief to those who drive their second-car SUV through the city centre for fun”, but benefits people on their way to work, said Environment Minister Leonore Gewessler (Greens).

She reiterated that rising costs were mainly due to the Ukrainian conflict and Russia’s policies. “It is extremely important to name the culpable person for this price increase: Vladimir Putin”, the politician said.

In the future, Austria should diversify its energy matrix to reduce its dependence on Russian gas, especially with expanding renewable energies, the minister said.

“The sun and the wind don’t send us an invoice. Gazprom does”, she added.

Numerous reactions and criticism

The package did not come without some criticism.

The ​​Austrian trade union federation (ÖGB) stated the cuts were too timid and pointed out increasing the commuter allowance helped higher earners more than those on lower salaries, in strong disagreement with the government.

SPÖ spokesperson for energy matters also stated that the measures would benefit higher earners. Alois Schroll said in a press release that the package brought only small steps that wouldn’t properly “counteract the wave of inflation or really relieve people”.

For the Neos, the package is “cosmetics, not sustainable relief”, and FPÖ leader Herbert Kick also said that “too little relief is received by the people affected”.

Environmental organisations such as WWF criticised the lack of measures to save energy, especially the incentives for commuters who drive instead of using public transportation.

Useful vocabulary

Pendlerpauschale – commuter allowance
Entlastungspaket – relief package
Steuer – tax
Umweltorganisationen – Environmental organisations

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COST OF LIVING

When will you get your cost of living ‘bonus’ payments in Austria?

Austria's package to fight the rising cost of living includes several "bonus" payments for residents in Austria. Here is when you can expect them.

When will you get your cost of living 'bonus' payments in Austria?

Austria’s federal government has unveiled a series of measures worth billions of euros to fight the cost of living crisis. New steps include increasing family allowances, cutting taxes and sending out one-off welfare payouts, as The Local has reported.

However, the authorities were not specific on when payments are to be expected, though they mentioned most of the measures would be in place “by October”.

READ ALSO: EXPLAINED: How Austria’s new finance measures could benefit you

On Wednesday, party leaders Sigrid Mauer (Greens) and August Wöginger (ÖVP) presented a roadmap to lay out when each aid could be expected.

Aid payouts

Low-income and vulnerable people in Austria, such as pensioners receiving minimum payments and aid recipients will receive a one-off €300 payment (Teuerungsausgleich) as compensation for inflation. The date is not set yet but should be in August and September.

The most significant payment will be the €500 sum, which consists of €250 as a climate bonus (Klimabonus) and €250 for the “anti-price increase” bonus (Teuerungsbonus). Everyone in Austria will receive that assistance (children receive half of the total amount) in October.

READ ALSO: Austria unveils €6 billion package to fight rising cost of living

An additional one-off payment of the family allowance (Familienbeihilfe) of €180 will be sent for those already on the program in August.

The timeline, according to Mauer, makes it so that the most vulnerable, including low-income people and families, will receive assistance first. Then, in autumn, the payments will go out on a broader scale.

Changes in bonuses and CO2 tax

The anti-inflation package also contains increases in existing family bonuses and payments.

The family bonus (Familienbonus) deduction increases from €1,500 to €2,000, and the increase for additional children payments (Kindermehrbetrags) to €550 is already in force for the fiscal year of 2022, so it will be valid in 2023.

READ ALSO: EXPLAINED: The main Austrian ‘tax traps’ foreigners should be aware of

The CO2 tax was postponed from July to October in time for the climate bonus payments, which were meant to offset the costs of the tax.

Finally, the end of the cold progression, the term used to describe increases in tax burdens which are based on increases in income but do not account for inflation, is set for 2023.

All the changes still need to be officially approved by Parliament and signed into law. For the measures to take place as soon as possible, a special meeting of the National Council was called for this Thursday, June 23rd.

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