Austrian Court Backs Bank Tax

by Ulrika Lomas, Tax-News.com, Brussels

08 February 2012

Austria’s constitutional court has recently ruled that the country’s bank tax, which was introduced at the beginning of last year in the wake of the financial crisis, does not violate the constitution.

The court rejected as unfounded claims by the bank Hypo Vorarlberg that the coalition’s so-called stability levy (Stabilitätsabgabe) was unfair and that it disproportionately affected smaller banks, which, unlike their larger rivals, did not benefit from state aid.

Presenting its ruling, the court underscored that the financial markets were the main cause of the financial crisis, which affected the real economy. The court alluded to the fact that since 2008 the government has introduced a series of comprehensive bank rescue packages, economic stimulus packages and other measures, to alleviate the effects of the financial crisis and to stabilize the financial markets and banks in Austria, noting that between 2008 and 2010, the state budgets were significantly burdened by such measures.

The court underlined the aim of the levy, namely to ensure that credit institutions that have significantly benefited from the emergency stimulus measures, contribute to the cost of the crisis, and to ensure financial market stability. The levy has a steering effect, the court continued, explaining that as risk-orientated financial instruments are taxed, systemic financial market stability is indirectly promoted.

In its decision, the court also alluded to a statement by the Austrian National Bank, which emphasized that the stability levy contributes to financial market stability and has a negligible effect on economic growth.

Introduced in January 2011, and imposed on a balance sum in excess of EUR1bn (USD1.3bn), Austria’s bank levy is expected to yield annual revenues of around EUR500m for the state. The levy is due to be reviewed by September 30, 2012.

Recommended