Austria Announces Tax Reform

March 19, 2015

According to Tax-News, Austria has announced a proposal to reform its income tax paired with adjustments to its property tax and value-added tax.

The income tax reforms would make their income tax system slightly more progressive. The bottom marginal tax rate (which is on income between $11,721 and $26,639) would drop from 36.5 percent to 25 percent. The top statutory tax rate (which applies to income over $63,934) would increase from 50 percent to 55 percent.

The effective marginal tax rates on income would not be as high. In Austria, the payroll taxes an individual earns can be deducted from taxable income.

Austria is also considering an increase in their dividend income tax rate, which currently sits at 25 percent.

The proposal would also increase the “reduced” VAT rate from 10 percent to 13 percent. The special reduced rate applies to goods such as food, books, passenger transportation, and “cultural events.” This will bring the reduced rate closer to its main VAT rate of 20 percent.

The property tax will also be raised. Austria currently raises very little (0.23 percent of GDP) from its real property tax. The United States raises about 2.81 percent of GDP from property taxes.

To learn more about Austria see how it compares to other industrialized nations, see the International Tax Competitiveness Index.

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