Austria Agrees To Bank Levy

by Ulrika Lomas, Tax-News.com, Brussels

03 November 2010

During a recent two-day budgetary meeting in Loipersdorf, Austria’s ruling coalition government finally united on plans for a tax and savings package for next year. The proposed 2011 budget provides for additional tax revenues of EUR1.2bn over the course of the coming year – half a billion euros less than originally intended, and, notably, for the introduction of both a bank levy and a fuel surcharge. The government’s tax and savings package is designed to reduce the country’s deficit in 2011 to 3.2% of gross domestic product (GDP).

At the heart of its budget, the government has firmly embedded plans for a bank levy to be imposed on banks in Austria from next year, expected to generate in the region of EUR500m in additional revenues for the state. Of this sum, EUR340m will be derived from either a 0.04% or 0.08% levy imposed on capital assets, and the remaining EUR160m from speculative derivative trades. Determined by the size of the bank, a 0.04% tax will be levied on banks with a balance of more than EUR1bn, while a 0.08% tax will be levied on banks with a balance in excess of EUR20bn.

In addition, the government also expects to generate in the region of EUR536m a year by introducing a carbon dioxide surcharge on fuel of EUR20 per tonne. This levy corresponds to an increase of 5 cents per litre in the price of diesel and to a rise of 4 cents per litre in the cost of petrol. Also, individuals electing to purchase a new high emissions vehicle (with emissions in excess of 180g of carbon dioxide) will be liable to pay a higher carbon dioxide surcharge than under the existing fuel consumption levy.

Other key proposals outlined by the government include plans to increase the taxation of interest earnings in foundations from 12.5% currently to 25%, and to tax profits from real estate in future, if the founder is a legal person. Under existing legislation, companies are able to avoid corporate taxation if property is placed in a foundation. Individuals may, however, continue to receive fiscal benefits if a property is placed in a foundation after a certain holding period. These measures are set to yield in the region of EUR100m for the government.

The government also plans to abolish the holding period for shares. Up until now, gains from shares have only been subject to tax within a one-year holding period. After this period, no tax is due. From January 1, 2011, however, profits from all stocks and shares will be subject to a 25% capital gains tax, irrespective of the holding period. The capital gains tax is to be withheld by the banks and subsequently transferred to the country’s tax authorities. The measure is expected to generate around EUR30m for the government in the first year, rising to EUR250m by 2014.

Other key measures contained in the budget and outlined by the government include plans to increase tobacco tax in Austria, and to introduce a plane ticket tax. Based on the German model, from next year a levy of EUR8 will be imposed on all flights to Europe, and a levy of up to EUR40 imposed on longer flights, designed to generate EUR60m in the first year and thereafter EUR90m. The government aims to generate a further EUR300m by removing existing tax loopholes and by clamping down on tax fraud.

Commenting on the budget, Austria’s Chancellor Werner Faymann and Finance Minister Josef Pröll emphasized that it ensured a fair distribution of the fiscal burden and that it provided a clear way out of the debt trap. Chancellor Faymann nevertheless acknowledged that the budget was far from set in stone, and that it was subject to review, hinting that changes could not be ruled out.

Faymann has also reportedly expressed his determination recently to strive for a reform of the country’s taxation within the current legislative period. Economic conditions permitting, Faymann intends to pursue the idea of wealth taxes in order to reduce the burden on employment, focussing on executive salaries and the introduction of a financial transactions tax. These plans had, he indicated, by no means been abandoned.

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