Austria Puts Off Change in Law That’s Locked Up $80 Billion in Trusts
(Bloomberg) -- Austria is holding off on plans to overhaul a trust law that has locked up 70 billion euros ($80 billion) of wealth in a “golden cage,” fearing the government will be seen to be intervening in a high-stakes battle over one of the country biggest funds.
The government, due to hold a conclave in a retreat near Vienna this week, won’t discuss the trust law at the gathering, according to a spokesman for the finance ministry. The main subject of the meeting will be tax cuts for small and medium income earners and for companies, with the spending reduction needed to fund them, the spokesman said.
The plan to leave the trust law off the agenda is partly to avoid the appearance of intervening in a battle around B&C Privatstiftung, one of Austria’s biggest and best-known trusts, according to people familiar with the matter. B&C says it’s the target of a “hostile takeover attempt” by a group led by Austrian investor Michael Tojner, which is seeking to realign its board and take over its assets -- including stakes in industrial groups Lenzing AG and AMAG Austria Metall AG.
The government has started mulling changes to the trust law, which was created in 1993 to stop capital flight and offer a tax-friendly way to pass on wealth. It wants to simplify rules that are seen as having spawned convoluted structures and slowed down decision-making. Those works will continue, said the people, who asked not to be identified because the discussions are private.
Chancellor Sebastian Kurz’s tax reform is a cornerstone project for his government’s second year in office. In his election campaign, Kurz promised 12 billion euros of relief before the end of his term in 2022. He and other ministers have dropped hints about elements of the plan in the past few weeks, although details have been sparse ahead of the final talks during the conclave starting on Thursday.
- Together with a 1.5 billion-euro family tax credit that’s already on the books, the total volume could be around 5 billion euros and target small and middle incomes as well as companies, Finance Minister Hartwig Loeger said last month.
- This implies that the new cuts, which should kick in from 2020, could amount to around 3.5 billion euros, and be financed by spending cuts and economic growth, leaving the country on track for a budget surplus.
- Measures could include
- lowering the rates for the main income tax brackets
- raising the level of income that’s free from tax or social security contributions
- cutting the main corporate tax rate to about 20 percent from 25 percent, which would translate to about 1.5 billion euros relief for companies
- a new tax targeting digital companies such as Google or Facebook; Loeger has mentioned imposing a 3 percent tax on digital advertising that could raise 50 million euros to 60 million euros annually.
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