Last year, the Austrian Trade Union Federation (ÖGB) launched a campaign calling for a massive tax reform in Austria. Last week the Austrian government finally agreed on a tax reform very much in the line of the campaign of the Austrian Trade Unions, “Lohnsteuer runter”.
The Austrian government reacted to the public campaign and proposals made by the trade unions. The ÖGB mobilised large parts of the labour movement for the campaign over the last months and collected more than 880.000 signatures demanding the reduction of income tax rates. After long negotiations within the Austrian government, supported by the experts of the trade unions, the outcome is a huge success for the labour movement as a whole.
The Austrian tax system was immensely unjust. While taxes on labour were remarkably high, taxation on wealth was relatively low. In 2014, for the first time in Austria’s history, revenues from income tax brought in more cash than those from VAT.
This led to the uneven wealth distribution in Austria. This imbalance is not only unfair, it also affects the economy: less purchasing power means less aggregate demand.
The agreed tax reform will decrease the income tax paid by the workforce by up to thirty percent. Especially the lower and mid-range income groups will profit.
- A mid-range income of 2100 Euro a month will receive 900 Euros more a year. The income tax was reduced by thirty percent for this income group.
- A tax relief of 5 Billion Euros that will benefit the low and mid-range income groups.
- The marginal tax rate will be lowered from 36,5 % to 25 %.
- The tax credit for the lowest income group will be tripled from 110 to 400 Euros.
The ÖGB’s goal was to prevent the workers from carrying the financial weight of the tax reform themselves. This was successfully avoided and the corresponding financing of the reforms have been found elsewhere.
The results are:
- New measures against tax fraud will be implemented.
- More purchasing power, more demand.
- Strengthening of growth and employment.
This political agreement of the coalition partners stands for the greatest tax reform since the 1970s and is a joint political success of the Austrian government and the trade union movement.