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Austrian Revenue Dip Exposes Gaping Budget Deficit

by Ulrika Lomas,, Brussels

12 November 2013

Despite recent assurances to the contrary, Austria currently anticipates a budget shortfall of between EUR18bn (USD24bn) and EUR30bn by 2018, predominantly due to weaker than expected economic growth and significantly lower than predicted tax revenues.

Although the figures have yet to be officially confirmed, it now appears more than likely that plans to lower the tax burden on employees in Austria in the new legislative period will have to be put on hold. Rather than looking forward to the promised tax relief measures, Austrians are now facing the prospect of a new savings package, and increased tax burden.

The news will undoubtedly put a strain on ongoing coalition negotiations between Chancellor Faymann's Social Democrats (SPÖ) and the Austrian People's Party (ÖVP), particularly in the already tense area of budget discussions. While the ÖVP has indicated that the envisaged tax reform will have to be postponed, the SPÖ remains committed to lowering the entry rate of income tax in Austria. The tax relief would be financed by wealth-related taxes, as championed by the party throughout the election campaign.

An unlikely SPÖ ally, Red Bull Chief Dietrich Mateschitz recently emphasized that wealth taxes are "fair and legitimate" in exceptional times, insisting that it is the duty of those who are in a position to do so to contribute more. Furthermore, Mateschitz advocated that profitable companies could make a one-off contribution to the overall effort. Mateschitz nevertheless made clear that imposing a small additional fiscal burden on workers would generate much higher revenue than depriving the country's millionaires of millions.

At the end of October, Finance Minister Maria Fekter welcomed Standard and Poor's confirmation of Austria's triple A rating, insisting that the Government's "efforts to achieve a consolidated balanced budget have truly paid off."

At the time, Fekter said: "Our goal was and continues to be achieving a sustainable restructuring of the government budget. Our budget discipline, debt limit, stability package, structural reforms and aggressive measures in areas with future potential have laid the foundation for continued future stability in Austria."

Concluding, Fekter stressed that the next milestone is a zero deficit in 2016.

TAGS: Finance | tax | employees | budget | corporation tax | tax rates | Austria | tax breaks | tax reform | individual income tax

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