Austria Taps Google to Help Finance $5.2 Billion Tax Cut

(Bloomberg) -- Austria plans to cut 4.5 billion euros ($5.2 billion) in taxes -- about 1.5 percent of economic output -- spread over the next three years, tapping Internet giants to help fund Chancellor Sebastian Kurz’s campaign promises while keeping the budget on track for a surplus.

The coalition government of conservatives and nationalists will start with about 1 billion euros of cuts mostly benefiting low-income workers in 2020, Kurz told reporters on Thursday. A broader income tax cut and lower taxes on corporations will follow. As much as 200 million euros will be raised with new levies on internet advertising, online retailers and sharing platforms.

“Our focus is on small incomes, medium incomes, and on measures to make Austria more attractive as a place to do business,” Kurz said ahead of a meeting in Mauerbach outside of Vienna. “The tax reform is designed not to raise new debt.”

By front-loading the cuts favoring low-income Austrians, Kurz is preempting opposition criticism of handing tax gifts to the wealthy, a key theme in the 2017 campaign. He’s also helping his junior coalition partner, the Freedom Party, which is predominantly relying on working-class and retired voters.

To balance against the cuts, Kurz said Austria will introduce a new 3 percent tax on Internet advertising revenue, as well as additional measures targeting global online giants like Alphabet Inc., Facebook Inc. and Amazon.com Inc. That package comes after Finance Minister Hartwig Loeger failed to reach a digital-tax deal for the entire European Union last year.

Details on the tax cuts will be developed in the coming months, Loeger said. Other key elements of the tax plan announced by the government on Thursday include:

• The biggest part of the measures implemented in 2020 is a 700 million-euro cut in social-security contributions, which have to be paid even by people who earn less than the tax-free income
• In 2021, the government plans to reform the main tax brackets. Details have yet to be specified
• Companies will get relief in 2022, including simplification of tax declarations that could make tax consultants unnecessary for small companies.
• Online retailers from non-EU countries will have to pay value-added tax for low-value goods as an exemption for orders below 22 euros is phased out
• Sharing platforms like Airbnb will be subject to stricter reporting rules to prevent tax evasion and will be made liable for tax payments

To contact the reporter on this story: Boris Groendahl in Vienna at bgroendahl@bloomberg.net

To contact the editors responsible for this story: Vidya Root at vroot@bloomberg.net, Jonathan Tirone, Patrick Henry

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