This Monday, the EU Commission presented its Annual Report on Tax Reforms in the Member States. Following the increase in tax in recent years, it is expected that it includes on average a slight tax reduction for 2015, which above all will be a result of reducing social insurance contributions. In respect of Austria, the Commission demands a further reduction of labour taxes, in particular with regard to lower incomes.

EU-wide, the Commission defines the most important tax policy problems as follows: the tax on labour is too high, the (recurrent) property tax is too low and loss of revenue with regard to Value Added Tax (through tax evasion, exemption clauses, which are too generous and reduced tax rates).

Report on Austria – Cut labour taxes!

The report on tax policy in Austria criticises above all the taxes on wages and salaries, which are still too high. In particular, low incomes would be overtaxed as the initial tax rate was too high. However, one has to consider that not all the figures used reflect the tax reform 2015. Even though it was positively mentioned, it does not go far enough. Hence the recommendation for Austria is to even further reduce the labour taxes in the lower segment and instead to increase other, less “growth adverse” taxes, such environmental, consumption, wealth and recurrent property taxes.

In fact, 15 other Member States are also faced with the problem of labour taxes, which are too high; they too get a recommendation by the Commission to reduce these, mainly and in particular in respect of lower incomes. To offset the reduction of labour taxes, the Commission recommends cutting public spending or a shift to other taxes (less “growth adverse”, see above).

Counter financing

These recommendations have to be evaluated differently: whilst a further reduction of income tax on low incomes would be important, a socially unbalanced lowering of public spending and an increase in consumption tax (such as Value Added Tax) has to be rejected, as it would affect people on low income the most. However, an increase in property tax would be welcome. The introduction of a wealth tax is also a long-term demand of AK and trade unions as these are necessary to also make the rich shoulder responsibility. Environmental tax is a keyword, which provides an umbrella for various measures. Their social compatibility depends on their configuration.

Tax evasion of multinational companies – hesitant replies

The report by the Commission also mentions tax evasion by multinational companies as a big problem; however, it does not provide a solution.

The report by the Commission has little concrete to say on the subject of corporation tax. It is a well-known fact that very different tax rates are responsible for a race to the bottom, which is at the expense of citizens and employees. It is vital to stop this trend at European level.

ETUC demands unified corporation tax rate of 25% in the EU

The reply of the European trade union movement to this question is clear: a request by the ÖGB, which demands an EU-wide minimum tax rate of 25% for companies, has been accepted at the Congress of the European Trade Union Confederation (ETUC), which took place in Paris this week. A unified tax rate could effective put a stop to tax evasion and ensure more tax justice.

Further information:

Tax report 2015