Asset tax hike useless, says study

An increase of taxes on assets will not help lower the state debt, according to a survey.

Researchers of Salzburg University – who cooperated with a tax consultant office to conduct their investigation – said yesterday (Weds) raising Austria’s comparably low taxation rate on assets would not significantly support the government in its current attempt to reduce the country’s debts and lower its budget deficit.

A study carried out by the Organisation for Economic Co-operation and Development (OECD) showed that Austria raked in only 0.5 per cent of its gross domestic product (GDP) with tax measures on privately owned assets in 2008. This share means Austria was clearly below the average rate of the organisations’ 34 member countries which earned 1.8 per cent of their GDPs this way in the same year.

The Social Democrats (SPÖ) of Chancellor Werner Faymann want to increase Austria’s rate to the OECD average. Such a step would help the state to a windfall of four billion Euros a year, according to the leftist party. The SPÖ claimed that neither the middle class nor the economy – which may grow less strongly than expected next year – would be negatively affected by this decision.

The People’s Party (ÖVP) – which is headed by Foreign Minister Michael Spindelegger – officially opposes any kind of tax hikes. However, reports have it that the conservative party, which has been part of the government since 1986, might say yes to some of the Social Democrats’ tax increase suggestions.

University researchers said their investigations showed that higher taxes on assets and a reintroduction of Austria’s inheritance tax would have no significant impact. They appealed to the coalition to consider raising the 10 per cent turnover tax rate on products and services like theatre tickets, food and rents. Drugs, pet food, wellness and spa services, gold coins and objects of art are also charged with just a rate of only 10 per cent while Austria’s general value added tax rate is twice as high.

The SPÖ reacted sceptically to the idea today. Its financial affairs spokesman Kai-Jan Krainer said such a measure might mean harm to growth and employment rates. Krainer added his faction would be ready to debate the proposal nevertheless if the ÖVP strongly supported it. Krainer also said he was not surprised that tax advisors rejected an asset tax increase considering their wealthy clients.

The ÖVP – which struggles in public opinion polls – stressed it wanted to concentrate on raising efficiency instead of taxes. General Secretary Johannes Rauch said creativity considering investment reductions and cost-cutting measures were needed instead of dreaming up tax hikes. However, the party’s spokesman for financial issues, Günter Stummvoll, said the government should debate taxing profits people made by selling properties.

Stummvoll said the ÖVP may give the go-ahead to such a measure. The ÖVP member of the parliament (MP) was quick to add that he disagreed with Faymann when it came to how much money could be made this way. The SPÖ chief recently spoke of a potential of 700 million Euros a year. Stummvoll said the Social Democrats had to be aware that the country’s financial situation could not be improved by doing nothing but introducing a charge like a tax on real estate sale profits.