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Austria Urged To Lower Labor Tax Burden

by Ulrika Lomas, Tax-News.com, Brussels

17 March 2020


The IMF has welcomed the Austrian Government's efforts to lower personal income taxes but said that the labor tax burden remains high.

In its latest report for Austria, the IMF noted that efforts have been made to lower social security contributions and to increase the annual tax break for families with children. It said that plans to further reduce income taxes for the bottom three income tax brackets are welcome.

In January, the Austrian Government announced plans to reduce the rates for the first three personal income tax brackets from 25, 35, and 42 percent, to 20, 30, and 40 percent, respectively. The changes are set to become effective from 2021.

However, the IMF said that the labor tax wedge will continue to rise over time due to tax bracket creep. It therefore recommended that the Government index the personal income tax brackets to inflation, which would provide greater certainty and support Austria's external competitiveness.

The IMF added that planned cuts to corporate income tax will boost competitiveness and will bring Austria's taxation level closer to the OECD average. The corporate tax rate is due to be cut from 25 percent to 21 percent by 2024.

TAGS: tax | corporation tax | tax thresholds | tax rates | social security | Austria | tax reform | inflation | individual income tax

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