Austria Adds Carbon Levy, Trims Income Taxes in Coalition Deal
(Bloomberg) -- Austria announced a complex set of tax measures, including a phased-in tax on carbon emissions and a gradual reduction of corporate and employee income taxes, as part of a deal between the ruling center-right and green parties.
The government’s 18 billion euro ($20.8 billion) package sets the economic agenda for the remainder of Chancellor Sebastian Kurz’s term.
It also forces Austrian households to assume part of the economic and environmental burden from emissions that contribute to climate change, including from driving cars and heating homes.
“We have united to give carbon-dioxide emissions a price,” Finance Minister Gernot Bluemel told reporters in Vienna on Sunday. The measures will support working people, contribute to Austria’s sustainability, and lead to a step-by-step reduction of government debt, he said.
The policy follows a German blue-print of phased-in costs, and comes on top of an existing European Union-wide scheme for large industrial companies.
It ends months of negotiations between the Chancellor’s People’s Party and the Green Party. It may add a layer of stability to a ruling coalition rocked by corruption investigations into Kurz’s previous coalition with the far-right Freedom Party. and the Greens’ efforts to block some infrastructure projects.
The carbon tax was at the lower end of some expectations. In a statement on Sunday, Greenpeace called the measure “too weak, too late and ineffective.” The World Wildlife Fund said the tax was a weak compromise and that the entry price should be at least 50 euro per ton. The International Monetary Fund has said Austria should raise the levy to 100 euro per ton by 2030.
- Start of tax on CO2 emissions at 30 euro/ton from July 2022, gradually rising to 55 euro/ton in 2025
- City dwellers will receive a partial tax break, while those in rural areas will be compensated for increased mobility costs
- Austria’s corporate tax will be lowered to 24% from 25% in 2023 and further to 23% in 2024
- The personal income tax rate will be reduced for the second tier of earnings to 30% from 35% as of July, and to 40% from 42% for tier-three earnings from mid-2023
- A subsidy for families will be raised to 2,000 euros per child from 1,500 euros
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