Austria Urged To Revise Environmental Taxes

11 Jul 2013

The Organization for Economic Cooperation and Development (OECD) has underlined the need for the Austrian Government to implement a raft of environmental tax measures, aimed at ensuring that polluters contribute to the cost of transport infrastructure externalities, including maintenance costs.

In its latest economic survey of Austria, the OECD warns that "although Austria has achieved high levels of economic growth and well-being, it must nevertheless address serious demographic, environmental, and globalization challenges if future generations are to share the same prosperity."

The OECD highlights the fact that particular attention will need to be paid to certain key areas that "could undermine the strength of Austria’s stable economy and thriving society."

According to the OECD, "environmental pressures will arise from urban sprawl and expansion of road transportation, requiring new effort to make polluters pay the cost of externalities."

It therefore advocates that: "Increasing diesel taxes, extending the road pricing system, abolishing the favorable taxation of company cars, and phasing out the commuting subsidy should all be considered."

Furthermore, the OECD maintains that an aging population may undermine the financial sustainability of the country's pension system. Finally, rising female participation in the labor force reinforces the need for making high-quality institutional child care available and affordable for the parents of children at all ages, to reconcile work and care responsibilities within families, the OECD adds.

Publication of the OECD's latest survey coincides with the presentation of the European Council's report and recommendations pertaining to Austria's 2012-2017 reform and stability program.

In its report, the European Council echoes the OECD's findings. Alluding to a rise in environmental taxes in Austria in 2011, which reflects the rise of excise duties on petrol and diesel, the Council emphasizes that this is "a step in the right direction." The Council suggests, however, that indexing environmental taxes to inflation could help to prevent tax levels from falling over time. It also slams the Austrian Government's commuter subsidy provisions, insisting that "the recent increase of commuter allowances goes against achieving the environmental greenhouse gas emission targets."

In Austria, under certain circumstances, individuals may be entitled to major or minor commuter tax allowances. The allowance reduces the income tax base and is then used to recalculate the tax owed. At the end of last year, the Austrian Government united on plans to extend the existing commuter tax break, to ensure that the provision is fairer for both part-time workers and for low-income workers in Austria in future.

At the time, the Government also announced plans to introduce an annual deductible amount based on the home-to-work distance (a so-called “commuter euros” system). Under the plans, commuters receive EUR2 (USD2.6) per kilometer travelled. Therefore, if the commuting distance is 40 kilometers, employees will be entitled to an annual deduction of EUR80. Part-time workers are entitled to a certain portion of the sum.

In addition, the Government agreed that the commuting credit for employees who are not subject to income tax, due to their low income, will be increased from EUR141 currently to EUR290.

While welcoming the conclusions of both reports, Austrian State Secretary Josef Ostermayer nevertheless made clear that much work remains to be done. Ostermayer highlighted the fact that the European Council considered Austria's fiscal consolidation policy to be "on the right path." The Austrian Minister explained that the budgetary consolidation course involves a mixture of savings-based measures, wealth-related tax initiatives, and plans to invest in the future.

Concluding, Ostermayer underlined the need for the Government to reduce the tax burden on purchasing power and to shift the fiscal burden on labor for the country's low-income earners, in a budget-neutral way, to recurrent property taxes.

Source: http://www.tax-news.com/news/Austria_Urged_To_Revise_Environmental_Taxes____61339.html