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EXPLAINED: What is Austria's 'Tax Freedom Day'?

Hayley Maguire
Hayley Maguire - [email protected]
EXPLAINED: What is Austria's 'Tax Freedom Day'?
Austria's wide-ranging tax reform is designed to help workers keep more of the money they earn, as cost of living rises. Photo by Markus Spiske / Unsplash.

People in Austria are working longer to finance government spending, leading to calls for a tax reform. Here's what you need to know.

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Anyone that lives and works in Austria will be aware that this is a high tax country. But what does Tax Freedom Day actually mean?

Here's a quick explainer.

READ MORE: Over half of Austrians on financially shaky ground: survey

Tax Freedom Day is not a tax-free day

Tax Freedom Day (otherwise known at Taxpayer Memorial Day) is the date when the Austrian population starts working to fund their own pockets, rather than the government's.

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In 2022, it falls on Monday August 15th – one day later than in 2021.

Martin Gundinger, a Research Fellow at the Austrian Economics Center, said: "This means that the Austrian population works seven and a half months exclusively to finance government spending."

Among OECD countries, Austria has one of the highest wage and non-wage labour costs at 47.8 percent. Only Belgium (52.6 percent) and Germany (48.1 percent) have higher costs than Austria, reports Kurier.

Non-wage labour costs refer to an employer's expenditure on personnel, such as social security and insurance contributions.

READ ALSO: Where are energy prices going up (again) in Austria?

Calls to reduce the tax burden in Austria

As the Austrian economy feels the heat from the increased cost of living and rising interest rates, there are calls for the federal government to reduce labour costs in Austria.

Christiane Holzinger, Federal Chair of the Young Economy in the Austrian Economic Chamber, said: "Reducing the cost of labour is an essential factor for the workplace and business location – and right now it is the best recipe for an economic upswing."

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

Likewise, Barbara Kolm, Director of the Austrian Economics Center, is worried that Tax Freedom Day could arrive later each year, which will further increase the economic burden on businesses and employees.

Kolm said: "Rising interest rates lead to higher burden to repay the debt. If there is no willingness for comprehensive reforms, Tax Freedom Day will be pushed back further."

READ MORE: Vienna forced to dim street lighting and cancel some Christmas illuminations

Gundinger, from the Austrian Economics Center, is also calling for a tax reform in Austria.

He said: "Against the background of the rising inflation rate, a reduction in taxes – along with cuts in government spending – makes sense."

"Decreasing taxes ensure higher productivity, and if more is produced, this has a price-dampening effect. In this respect, an urgent rethinking of politics is necessary, which is currently trying to counteract this with additional expenditure and special levies."

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Additionally, the New Austria and Liberal Forum (NEOS) is calling for the expansion of state-funded childcare for all children from the age of one to allow more women to enter the workforce on a full time basis.

The NEOS also want to end cold progression (when the tax burden increases but income does not due to inflation) and reduce non-wage labour costs by 6.55 percent.

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