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Austrian Income Tax Cuts Boosted Economy, Says IMF

by Ulrika Lomas, Tax-News.com, Brussels

03 February 2017


Austria's economy recovered more strongly in 2016, supported by tax cuts, the International Monetary Fund (IMF) said in its Article IV report for the country.

The IMF pointed out that growth had been lackluster in 2012-15, with an average economic growth rate of 0.6 percent. This rose to 1.4 percent in 2016, with the IMF noting that growth had been "broad-based, driven by private consumption supported by income tax cuts, [and] a recovery in investment..."

It said that the country's future reforms should focus on shifting the tax mix away from labor toward property, pollution, and consumption (by improving value-added tax efficiency). It added that despite recent tax relief, Austria's high labor tax wedge remains a drag on employment creation. The report said that Austria could make its tax system more efficient by giving local authorities more responsibility for certain taxes. But added: "At the same time, most business and consumption taxes should continue to be set at the federal level to avoid beggar-thy-neighbor policies and economic distortions."

TAGS: tax | investment | business | value added tax (VAT) | International Monetary Fund (IMF) | Austria | individual income tax

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