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Austria Announces Tax Reform

1 min readBy: Kyle Pomerleau

According to Tax-News, Austria has announced a proposal to reform its income taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. paired with adjustments to its property taxA property tax is primarily levied on immovable property like land and buildings, as well as on tangible personal property that is movable, like vehicles and equipment. Property taxes are the single largest source of state and local revenue in the U.S. and help fund schools, roads, police, and other services. and value-added tax.

The income tax reforms would make their income tax system slightly more progressive. The bottom marginal tax rateThe marginal tax rate is the amount of additional tax paid for every additional dollar earned as income. The average tax rate is the total tax paid divided by total income earned. A 10 percent marginal tax rate means that 10 cents of every next dollar earned would be taken as tax. (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 incomeTaxable income is the amount of income subject to tax, after deductions and exemptions. For both individuals and corporations, taxable income differs from—and is less than—gross 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.