Austria’s Next Government Should Raise Carbon Taxes, OECD Says

(Bloomberg) -- Austria should raise environmental levies and carbon prices while reducing labor taxes, the Organization for Economic Cooperation and Development said in a report that comes a day after talks to form a government including the Green party started.

“Strong focus on employment and GDP growth may have overshadowed environmental priorities in the past,” the OECD said in a country report, released on Wednesday. “Low carbon prices and taxes in international comparison should be increased to pursue the National Climate Strategy 2030 in more economically efficient ways.”

Sebastian Kurz’s conservative People’s Party and the Greens, led by Werner Kogler, started formal negotiations on Tuesday after a month of exploratory talks between the groups sparked confidence that they can bridge their big policy differences -- among them the taxation and regulatory aspects of climate policies.

The OECD’s other recommendations include issues it has highlighted for many years. Most importantly:

• Pension reforms: Austria’s effective retirement age is still “well below comparable countries” and below the official age, leaving the pension system “exposed to significant risks”
• Tax system: The mix between taxes on labor and on wealth is unbalanced and not employment-friendly; “substantial labor tax cuts” should be funded by higher consumption, environmental and inheritance taxes
• Corporate funding: Austrian companies rely too much on tax-subsidized debt; equity investments should be made easier and more accessible
• Integration of low-skilled migrants and refugees “fall behind outcomes in other countries facing similar outflows” and attraction and retention of high-skilled foreign workers should be facilitated

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

To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net, Zoe Schneeweiss, Brian Swint

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