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After long negotiations, the federal government under the People’s Party (ÖVP) and Greens has now agreed on an eco-social tax reform. The key points are in place, but the details are still being worked out. The majority of the measures will take effect on July 1, 2022. In total, the government coalition promises to reduce taxes by 18 billion euros by 2025. Environmentally damaging behavior will be charged a price on CO2 emissions, and there will be a climate bonus to compensate for this.
Wage and income tax will be reduced. Corporate income tax for companies will also be reduced. Chancellor Sebastian Kurz (ÖVP) praised the “mega-project” as the “biggest tax relief of the 2nd Republic.” For Vice Chancellor Werner Kogler (Greens), it is “historic.” Here are the key points:
- CO2 price: driving and heating will become more expensive. From July 1, 2022, the entry price will be 30 euros per ton. This means that the price of a liter of fuel will initially rise by around eight cents per liter. In 2023, CO2 emissions will cost 35 euros per ton, then 45 euros from 2024, and in 2025 the price will be increased to 55 euros. From 2026, there is to be EU-wide CO2 emissions trading for all areas of life. The cumulative revenue from the CO2 tax will amount to around five billion euros by 2025, although it will only amount to around half a billion in 2022 because it is only half a year.
- climate bonus: Depending on where you live and whether you have public transportation or rely on a car, you get back the revenue from CO2 pricing as a regionalized climate bonus. In the first year, it is paid out in full, although the tax is not due until July 1. Climate Protection Minister Leonore Gewessler (Greens) explained this postponement by half a year with the currently tense situation on the gas market, which has led to an enormous increase in gas prices. Through the CO2 tax, this would lead to massive increases in price, which one wants to avoid. Specifically, there will be four levels in 2022: 100 euros, 133 euros, 167 euros and 200 euros per year and person in the first year. For children, there will be half the “regional climate bonus.” The exact calculation by region will be made first. In addition, 500 million euros will be invested in an offensive for clean heating, with a move away from oil and gas, the exchange of boilers and thermal renovation being promoted. With the increase of the CO2 price also the climatic bonus will rise and amount to approximately in the year 2025 nearly double, because also the CO2 price will increase to 55 euro, explained vice chancellor Werner Kogler (Greens). However, to the extent that CO2 emissions and thus the revenue from the levy decline, the “regional climate bonus” will also decline. The tax reform brings a “new way of thinking”. Environmentally friendly behavior becomes cheaper, environmentally harmful more expensive. “Less dirt in the air, but more money in the wallet,” says Kogler.
- Labor – Starting in July 2022, the payroll tax will be reduced from 35 to 30 percent in the second bracket, and from 42 to 40 percent in the third bracket starting in July 2023. The other stages will remain unchanged.
Health insurance contributions for small incomes will also be reduced from July 2022, starting at 1.7 percentage points. Up to a gross income of 2,600 euros, there will be a gradual reduction in contributions. According to government figures, this will benefit 2.3 million employees and 1.6 million pensioners. In addition, an employee participation model is also to be introduced, with which employees can profit tax-free from a company’s profits with up to 3,000 euros.
In full implementation of the tax reform, the total non-wage labor costs are expected to reduce the burden on labor by 4.7 billion euros and lower the tax ratio from 47.3 to 46.2 percent, said Labor Minister Martin Kocher (ÖVP).
- Families: also from July 2022, the family bonus will be raised from 1500 to 2000 euros per child per year. Those who earn 2500 gross per month and have two children will no longer pay taxes. In addition, single mothers with low incomes are to benefit more from the child bonus. Single parents with an income of up to 12,000 euros per year will receive a child bonus of 450 euros per child instead of the previous 250 euros. In addition, the group of recipients will be expanded. In the future, families in which both partners work and both children are entitled to the child bonus will also be eligible.
- economy: Companies will be relieved of up to 700 million euros by reducing corporate income tax from 25 to 23 percent by 2024 (one percent in 2023 and one percent in 2024). In addition, there will be relief for particularly CO2-intensive companies, following the German model, so that there is no “carbon leakage” – companies should not relocate their production to other countries with less stringent requirements because of the costs associated with climate measures. A “hardship clause” is envisaged for particularly energy-intensive companies. The tax on self-generated electricity fed into the grid is to be abolished – the government estimates this relief at 50 million euros.
The tax advantage for farmers in the form of “agricultural diesel”, which was eliminated in 2012, is to be reinstated in the future. In addition, energy self-sufficient farms are to receive subsidies totaling 25 million euros.
— source: tt.com and from the press conference of the federal government via orf on Sunday, october 3, 2021./Picture: pixabay.com
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