Austria preparing for lower taxes

The Austrian economy continued to tick over at a slow pace at the beginning of 2019. Economic growth between January and March was unchanged at 0.3% compared with the previous quarter. In the months ahead, we expect economic momentum to remain only slight. Foreign trade in particular harbours risks.

The planned tax reform could generate stimulus in the medium to long term through higher consumer spending and rising investments. It is therefore to be welcomed. The published key points of the reform reveal a whole array of measures. The relief volume of an annual EUR 8.3 billion from 2022 is quite considerable, with particularly citizens on low or middle incomes likely to benefit in the coming years. However, the tax reform also offers relief for companies. The main driving force behind this project is the tax competition with Eastern Europe.

Despite the noticeable tax cuts, the Austrian government essentially has no plans to introduce new taxes or tax increases elsewhere. At the same time, it has no intention to create new debt. General government debt is to be reduced over the next few years and finally fall below the 60% mark in 2023. In the end, however, the tax reform could well thwart the budget plans. But backed by solid economic growth, a large budgetary gap is unlikely to be created.

 

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