Austrian Chancellor Stands Firm On Wealth Tax

by Ulrika Lomas, Tax-News.com, Brussels

11 January 2012

Following the first ministerial council meeting of 2012, Austria’s Chancellor and leader of the Social Democrats (SPÖ) Werner Faymann underlined the importance of a stable eurozone and of generating new revenues in Austria as part of the government’s planned national consolidation package. The Chancellor also stressed the importance of introducing a financial transactions tax, championed by France and Germany.

During his speech, the Chancellor reiterated government aims to eradicate the country’s deficit and to reduce debt in Austria by EUR2bn (USD2.5bn) a year until 2016.

Noting that ongoing budgetary discussions with all members of the government have so far been constructive, the Chancellor emphasized that the government intends to unite on plans for a whole consolidation package by the end of February, to boost employment in Austria and the country’s creditworthiness.

While not revealing specific details of individual measures currently under discussion, Chancellor Faymann nevertheless underscored his conviction that the budget could not be consolidated solely by means of expenditure-based measures, maintaining that ideas for generating additional revenues would also have to be considered.

Faymann recently referred to a package without wealth taxes as “unthinkable”, alluding explicitly to a tax on capital gains derived from property sales.

Siding with Austria’s Vice Chancellor and leader of the Austrian People’s Party (ÖVP) Michael Spindelegger, however, President of the Austrian Economic Chamber (WKÖ) Christoph Leitl insisted that budgetary consolidation should be achieved by means of savings and structural reforms, and not by simple tax rises. New taxes are not necessary, Leitl continued, warning that in the current climate any new taxes or higher taxes would be extremely damaging for the country’s economy, adversely affecting jobs and growth.

Instead, Leitl cited areas of savings potential amounting to billions of euros, which, he argued, could serve to eradicate the entire state deficit, notably as regards early pensions, administration and the health care system. Scope could also be created for necessary future investment, Leitl added, stressing that only expenditure-based measures to consolidate the state budget are sustainable and that the second part of the strategy must be to introduce targeted measures designed to stimulate growth.

The government’s EUR10bn tax and savings package is expected to be adopted by the national council at the beginning of March.

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