Austrian Corporate Tax Cut Sparks Rise In Foreign Investment

by Ulrika Lomas, Tax-News.com, Brussels

19 January 2005

Figures published by an Austrian government agency have shown a marked rise in foreign investment in anticipation of the country’s decision to cut its corporate income tax rate by 9% this year.

According to the Austrian Business Agency, which is the national investment promotion company, there was a 30% increase in successfully concluded investment projects last year compared to 2003, a rise that has been attributed in large part to a cut in corporate tax to 25% from 34% which took effect on January 1.

“The business results already reflect the positive impact of the tax reform measures which just took effect,” noted Martin Bartenstein, Austrian Minister for Economic Affairs.

In addition to the corporate tax cut to one of the lowest levels in the EU, the reforms also contained a number of measures designed to reduce the tax burden on multinational firms using Austria as a base for regional headquarters.

This has had the effect of attracting more investors from Germany, which accounted for the largest share of the 107 investment projects – a statistic likely to antagonise the German government and stoke the fires of debate on European corporate tax harmonisation.

A total of 47 companies investing in Austria were from Germany, a slight rise compared to the 43 German firms investing in 2003. Italy was second with 8 firms, followed by Switzerland with 6 companies.

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