Blümel: “We’re reducing tax for everyone who goes to work and is industrious” Biggest tax relief initiative in the Second Republic to date
“We have put together a package built on four main cornerstones. Firstly: working people should have more left in their pay packets for them to live on. Secondly: we want to incentivise eco-friendly behaviours. Thirdly: we are introducing policies that support Austrian businesses and enable growth. And fourthly: we are aiming to reduce, step by step, our country’s debt ratio. And we will achieve all of this with this package,” stated Finance Minister Gernot Blümel when presenting the biggest tax reform seen in the Second Republic to date.
Relief for privately-owned, medium-sized businesses and for families
“People who go to work, who get up and are diligent, will have more to live on at the end of the day, thanks to our measures,” explained the Finance Minister. The full effect of the reduction in taxes on labour will amount to some EUR 4.7 billion per year by 2025. Reductions in the 2nd and 3rd-level tax bands from 35 to 30 per cent and 42 to 40 per cent respectively will come into force in July 2022 and July 2023 respectively. 3.8 million wage taxpayers will benefit from this lowering of the tax bands. “Even those people who earn so little that they don’t have to pay wage tax will have more to live on,” declared Blümel. Through the cuts in health insurance contributions, even those on low incomes and pensions will benefit from a marked reduction from 2022 onwards. In total some 2.3 million employees and some 1.6 million pensioners will benefit from the reductions in health insurance contributions.
“I am particularly happy at the fact that we are giving strong support to families - and will be raising the amount of the Family Bonus from EUR1,500 per child per year significantly to EUR 2,000 per child per year,” stated Blümel. In addition, the amount of the “Kindermehrbetrag” tax relief/allowance item will rise to EUR 450.
A new employee profit sharing model, which was announced as part of the government programme and which will allow a share in profits of up to EUR 3,000 per year to be exempt from tax, will also come into force as part of the tax reform.
A package of measures to bolster the domestic economy
“We want to build on the optimism that has followed on from the crisis and strengthen Austria as a location for business, thereby supporting the resilience of the employment market,” stressed Blümel. “For this reason we will be palpably easing businesses’ tax burden by reducing corporation tax from 25 per cent to 23 per cent by 2024. We want Austrian businesses to be successful now and in the future, in international markets too.”
In addition, there are plans to introduce an investment allowance of up to EUR 350 m; a carbon leakage regulation based on the German model so that domestic companies do not relocate to cheaper countries; a hardship ruling for companies whose business activities are by definition energy-intensive; and tax exemption on self-generated electricity. As well as this, there are plans to raise the tax exemption level on profits from 13 to 15 per cent, as well as the tax credit amount on low value assets.
Farming and forestry will benefit from a flat-rate price for agricultural diesel and funding to encourage farms that are self-sufficient in terms of energy.
“We in government have jointly agreed that a price must be placed on CO2 emissions. In doing this, we honour our responsibilities and will be implementing European specifications. We need incentives for those who can switch and not punishment for those who are not lucky enough to live close to a metro station. So we intend to help those people who continue to be dependent on their cars. We will also support people who can’t afford to install a new heating system. We are clear that our CO2 pricing model has to take account of, and properly support, countryside dwellers in particular,” said Blümel in conclusion.