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Country Rankings - Austria

  • May 23, 2017   Austria: thin end of the wedge

    I can see it is going to be struggle to award encomiums this week, so I'll give it to Austria, which reduced its tax wedge the most last year, according to the OECD. The European Economic and Social Committee, a consultative body of the EU, recently held a debate on tax and the digital economy, in which it was concluded that the digital economy is no longer a part of the economy, but is becoming the actual economy itself. Well excuse me if I don't fall off my chair in shock! With the OECD's BEPS project now four years old, the "digital economy as the economy itself" refrain is now a very familiar one. Indeed, it is stated in the opening text of Action 1 of the BEPS Action Plan published in July 2013. We've been hearing on a regular basis how national tax rules are failing to adapt to new digital business models, particularly in areas such as the sharing economy. So, the problem has been recognized. Now it's a matter for governments and legislatures to do something about it, instead of throwing up tax barriers to technological progress, or just merely doing nothing, as appears to be the case. Considering the EU supposedly has a seamless Single Market, you'd think this issue would be of less concern for entrepreneurs and consumers in the digital economy. But just read the following quote from a press release related to the European Commission's Digital Single Market project: "The EU Single Market for e-commerce is still not functioning as it should as there are significant differences in the rules, standards, and practices applied to e-commerce within individual member states. As a result, companies find it difficult to provide online services or to sell goods across EU borders, and citizens miss out on the opportunity to purchase goods and services from websites based in other EU countries." That press release was published in January 2012. But I'm sure most EU residents and providers of digital services would agree that little has changed in the last five-and-a-half years.
    Source: http://www.tax-news.com/news/Taxes_On_Labor_Continue_To_Fall_Says_OECD_Report____73951.html

  • Mar 21, 2017   Austria: lift off

    However, I'm going to award an encomium instead. Not to the UK, but to Austria, which has decided to reduce its air passenger tax by half from 2018. It'll be interesting to see how Austrian airports perform in comparison to their competitors across the border in Germany, a country singled out by IATA for its high taxes alongside the UK. Then again, perhaps the Germans won't notice, because much of their attention seems to have been diverted by the possibility of a border tax in the United States, either in the form of House Speaker Paul Ryan's border adjustment tax, or the blunter instrument of President Trump's import tariffs on firms shifting production overseas. And it's not surprising that this issue has attracted Germany's interest, as it has a huge trade surplus with the US.
    Source: http://www.tax-news.com/news/Austria_To_Halve_Air_Travel_Tax____73744.html

  • Apr 27, 2015   Austria: paying a high price

    "What have the Romans ever done for us," Reg, played by John Cleese, asks his fellow anti-Roman insurgents in a memorable and amusing scene from the movie The Life of Brian "apart from better sanitation and medicine and education and irrigation and public health and roads and a freshwater system and baths and public order?" You could ask a similar question when looking at your paycheck or tax return and discovering how much you are paying in tax, i.e. "what has the Government ever done for us?" The answer to that will vary greatly depending on where you live. If you live in Europe, the Government probably does quite a lot for you, regardless of whether you want it to or not. The Scandinavian countries stand out as providing the most comprehensive "cradle to grave" welfare states. But Austria must come pretty close. Indeed, I discovered recently that Austrian families are supported more generously by government than any other country in Europe, to the tune of almost three percent of the country's GDP. Child care for example is heavily subsidized, and parents are encouraged to keep their children in education as long as possible, with monthly credits which can last until the "child" is 26 years of age. And, like neighboring Switzerland, Austria invests heavily in infrastructure. Despite extremes of temperature between winter and summer, the roads don't seem to crumble away every year like they do in some countries with more temperate climates, and, of course, the trains are reliable and punctual. But at what price do trains run on time? A lot of tax, that's what. Indeed, the reason I bring this up is because of a news story on the Government's tax cut plans. I had to read the following fact more than once to make sure I hadn't misread it: you start paying income tax at almost 40 percent in Austria when your salary hits EUR25,000 a year. That means Austria's lowest tax bracket (leaving aside the 0 percent allowance) is at roughly the same as the top rate in the United States. What's more, the 50 percent rate kicks in at EUR60,000, which seems criminally low; the Brits are currently tearing themselves apart about a 50 percent rate on incomes above GBP150,000 (USD225,000). The tax reform bill will ease the tax burden somewhat for those earning up to EUR18,000, but the introduction of six brackets instead of three isn't likely to have much of an effect on everyone and will probably just complicate things. Ok, most Austrians might be content with this arrangement, but boy do they have to pay for it! Reg and his gang had to suffer the iron fist of Roman rule to enjoy some of the benefits of civilization. And so Austria's citizens must suffer some of the highest tax rates around for first-class public services. Too high in my opinion.
    Source: www.tax-news.com/news/Austria_To_Cut_Income_Tax_Rates____67843.html

  • Feb 05, 2015   Austria: wasting time

    Rarely do I get the chance to do a "two for the price of one" execration, so I should quite enjoy this. France and Austria are the particular targets for my ire, and I've a feeling it's going to be hard to miss! That's because the European financial transactions tax is involved, and seldom has there been a tax easier to shoot down. Because nobody can agree on such fundamentals like what to tax and at what rate, and in order to spur along the deadlocked FTT negotiations between the 11 participating member states (or is it 10 now, after the Slovenian Government had a sudden attack of common sense following a Council meeting last May, and refused to sign a joint declaration?), France and Austria have come up with the idea of lowering the level of the proposed FTT and widening its scope. Given that the way in which the original proposal was drafted gives the FTT enormous extra-territorial reach, does the FTT really need wider application? Obviously my answer to that is no, it doesn't. Because the whole thing breaks a multitude of laws, including the EU's own treaties, anyway, and is unworkable no matter how much you mess about with it. Introducing the FTT within parts of the EU would illegally exceed member states' jurisdiction for taxation and create distortions to the detriment of non-participating EU member states, while the "deemed residency" principle would contravene customary international law. And those aren't my words. They come, paraphrased, from a legal opinion by the EU Council's own lawyers, leaked to the Financial Times in 2013. Worse, the finance industry has already concluded, more or less, that the FTT countries will be committing economic suicide if the tax is ever introduced. In fact, the list of flaws is so long there's no room here to list them all. It saddens me and maddens me in approximately equal measures though, that the EU's top bureaucrats and politicians are so obstinate in pursuing what is clearly a politically-popular, but economically misguided tax, spending a lot of time and resources in the process. So, Austria and France, I have a better suggestion to take to the EU11 (or perhaps it should be named the EU10.5 now): give up, go back home and think of another way to punish the bankers.
    Source: www.tax-news.com/news/France_Austria_Seek_EU_FTT_Breakthrough____67073.html

  • Jun 12, 2014   Austria: with coalition paralysis

    Here's another old-fashioned conversation going on across the border in Hungary's one-time imperial partner, Austria, with a cross-aisle coalition government at loggerheads with itself over whether to finance tax cuts for the poor with extra taxes on the rich. As in many countries in Europe, this discussion focuses on what is called "bracket-creep" or "cold progression" in German, that's to say, the automatic rise in taxation that follows on from inflation-linked wage increases if tax brackets don't change. But hold on a minute, just a few kilometres away, Mario Draghi is doing his utmost to encourage inflation, because (as he sees it) there isn't enough of it. So how can there be bracket-creep if there is no inflation? It is just a nifty idea that left-wing negotiators have fixed on in order to bash the rich. Well, Gordon Brown found out about bashing the rich during his short and disastrous tenure of Downing Street. It doesn't work! But the news hasn't filtered across to Central Europe: Fog in the Channel: Continent Cut Off!
    Source: www.tax-news.com/news/Austrian_Unions_Threaten_Action_Over_Tax_Reform____64854.html

  • Apr 24, 2014   Austria: making the right noises

    Promises, promises, from the Austrian Government, which would like to reduce and simplify business taxation. Half a bouquet then, for good intentions, but the reality is very different. According to the OECD's annual "Taxing Wages" publication, the average tax burden for a childless single worker earning the average national wage was 49.1 percent last year, the third highest in Europe. But the Government is trapped by its foolish decision to stand behind failed bank Hypo Alpe Adria, beginning by nationalizing it in 2009. The full extent of the damage is not yet known, or at least not being admitted to, but estimates range north of EUR19bn, and increased tax revenue of EUR5bn last year, while it may be testament to the Government's resolve, does not go very far in dealing with such losses. Public debt stands at 74 percent of GDP, and has been rising steadily in recent years. The Government is now saying that it will transfer EUR18bn of compromised assets into a "bad bank," but other Austrian banks have refused to participate in it, so what difference will it make? There is a bank levy which is expected to generate EUR5bn over the next ten years, and will be devoted to Hypo's losses, but sooner or later the taxpayers will have to cough up. To add to its woes, the Government is formed of a coalition, and the partners are far from agreeing about taxation policy.
    Source: www.tax-news.com/news/Austria_Eyes_Payroll_Income_Tax_Reform____64421.html

  • Jan 16, 2014   Austria: on the take

    Turning from the sublime to the gorblimey, I am gobsmacked by the strange dance going on in Germany over the Grand Coalition's proposals for a new sort of vehicle tax. First of all, Germany's doesn't need any new taxes at all, and should be getting rid of existing ones rather than making up new ones. Austria for example has said that it will oppose a toll system that differentiates against non-German drivers, and it's quite hard to see how it wouldn't, given that the Coalition means the toll to replace an existing tax (not paid by Austrians, evidently). In any case, a toll would be extremely clunky to operate and would erect new barriers in a Europe which is supposed to be about demolishing existing ones. If I arrive at a German toll-road in a 30-year-old Italian sports-car, how are they going to know what to charge me (the toll is supposed to vary with emissions)? There will have to be testing stations at the borders which have been abolished by Schengen. What this is all about, in reality, is the somersaults Angela Merkel was forced to turn in order to reach agreement with her Grand Coalition partners; the deal looked suspect as soon as it was announced, and here are its first noxious fruits. Plenty more to come, I suppose.
    Source: www.tax-news.com/news/Austria_Submits_Provisional_Budget_For_Approval____63306.html

  • May 09, 2013   Austria: throws in the towel

    With Austria's apparent capitulation on the banking secrecy dossier, and the news that a number of the UK's offshore dependencies are going to join the G5's anti-evasion initiative, it certainly looks as if the last shreds of financial privacy are being torn away, at least for individuals. But the picture is a lot more nuanced than that: first of all, Austria will not give up secrecy for its own citizens (so next time you get divorced, make sure you pick a Merry Widow from Vienna for your third wife) and secondly, Austria is making conditions which may prove hard to fulfil, especially in regard to the Savings Tax Directive. And it's worth noting that the offshore dependencies in question already conform to that Directive, so there is nothing much new in that respect for individuals. The Directive really is a paper tiger for anyone with a good lawyer, and even the Commission's "improvements" to it, which they have been struggling to implement now for eight years, won't make much difference, with the biggest loophole being of course that major wealth destinations such as Singapore, Hong Kong and Panama simply refuse to have anything to do with it. Something I do wonder about in respect of the encroaching tide of automatic information exchange is the sheer volume of data that is being exchanged and the cost of the process; HMRC, for instance, in London is going to receive data on bank accounts in forty or so other countries, including, if the reverse FATCA goes into effect, the USA. That's hundreds of millions of bank account details, every year. There are things called computers, of course, but there is no harmonized international identification system and there are ever so many people called John Doe. How will they set about storing, sifting and analyzing the data? Perhaps, in that haystack of information, the needle of your bank account will even harder to find than if it had stayed behind in cloistered secrecy in Wichita?
    Source: www.lowtax.net/asp/story/front/Austria_Willing_To_Negotiate_With_EU_On_Banking_Secrecy____60601.html

  • Apr 18, 2013   Austria: mistreat China

    One country which is conspicuous by its absence from the TPP talks is of course China. Although there are ongoing negotiations between the Middle Kingdom and various other countries, and China has FTAs with a scattering of other countries, notably including ASEAN and New Zealand, on the whole it is lagging. And it considers itself as an injured party in trade affairs, complaining this week about the level of "dumping" and "counter-vailing" measures it is subject to, particular emanating from the USA. A lot of the problem revolves around the designation of China as a "non-market economy" (NME). For anyone who, like me, finds it extraordinary that China should still be regarded as an NME, a word of explanation is in order: an NME is a country in which the State subsidizes enterprises or indulges in other non-market behaviour, despite WTO rules against it. So, an NME is allowed to cheat, if you will; but the other side of the coin is that for an aggrieved counter-party, the burden of proof is lower in anti-dumping proceedings. China's accession agreement to the WTO allows it to retain NME status only until 2015; but the change is not in China's gift, and both the USA and the EU persist in regarding China as an NME, despite frequent requests from China for them to treat it as a market economy.
    Source: www.lowtax.net/asp/story/front/China_Sees_Itself_Subject_To_Increasing_Trade_Friction____60398.html

  • Dec 06, 2012   Austria: in Reagan territory

    Back on the "less is more" theme, there is another proof of it this week in Austria, which has increased its corporate tax take by 20% after cutting the tax rate by 30%. The Gipper is smiling knowingly at this from his cloud, although his successors on the Hill don't seem to have learnt the lesson, and most governments find it just too counter-intuitive to be possible. Companies are run by people, and many of their shareholders are people too: people are humans and suffer or benefit from human nature, usually both at once, and human nature is to resent being over-taxed. There is starting to be a fair amount of evidence that the cusp is round about 30%: below that level people may moan, but they cough up without feeling robbed; above that level and they spend increasing amounts of time trying to reduce the amount of tax they pay. So it's no surprise that the Austrian corporate tax rate fall was from more than 30% to less than 30%. The US corporate tax rate is around 40%, depending on the state you are in; it needs to come down to 25% maximum, and there is no need to worry about offsetting savings - Uncle Sam will get more money that way.
    Source: http://www.lowtax.net/asp/story/front/Austrian_Company_Tax_Cut_Pays_Dividends____58594.html

  • Oct 18, 2012   Austria: Austria taxing and spending

    Austria has published its budget for 2013, gloating over the extra cash that is going to roll in from the deal with Switzerland and from the financial transactions tax. It expects 1% growth next year - well, we'll see - but tax receipts are expected to rise by 5%, while expenses will be broadly flat over 2012 but 11% higher than in 2011. Debt will rise slightly to 76% of GDP. Seen from the perspective of countries with collapsing economies like Greece, Italy, Spain and Portugal (with France soon to join the club) this may seem like a good performance. To me it is lamentable: for all the government's fine words, nothing is being done to cut back on costs, and the solution to all problems is simply to increase taxation. If there is a EUR5bn windfall to come from the Swiss deal (I am guessing - they don't say) then it should be set straight against debt, not used to avoid painful cuts.
    Source: http://www.lowtax.net/asp/story/front/Austria_Unveils_2013_GrowthBased_Budget____57812.html

  • Sep 20, 2012   Austria: communautaire to the death

    So Austria and Germany 'remain committed' to a financial transactions tax. France has already implemented one. But by now Angela Merkel is just pretending: Germany has too much to lose with Finanzplatz Frankfurt to take silly chances; even the modified idea of a stamp duty like the British one on share sales proved distinctly unappetizing when German economists started really chewing into it. Werner Faymann, Austrian Chancellor, is a different proposition; the Austrian government genuinely believes in the power of the EU and thinks that an FTT can be made to work. He's right in the sense that if all 27 members (plus presumably Switzerland and Liechtenstein) joined in, then the inevitable damage could be limited, and would take some years to show itself; but this is an impossible hypothesis. The best that can be hoped for (if you are a Continental) or the worst that need be feared (if you are an Anglo-Saxon) is a variable geometry group of six or seven committed Europeans built around France, Germany, Austria and Luxembourg, and as a piece of self-evident collective suicide it will simply never happen, which is what Angela knows, allowing her to dissemble so successfully. The French on the other hand are going to go down fighting, which is glorious but not very sensible. Ironically, the famous 'C’est magnifique, mais ce n’est pas la guerre: c'est de la folie,' was uttered by a French soldier watching the charge of the English light brigade. A good epitaph for Francois Hollande?
    Source: http://www.lowtax.net/asp/story/front/Austria_Germany_Remain_Committed_To_FTT____57257.html


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