President’s tax appeal upsets ÖVP

Federal President Heinz Fischer has been criticised for backing calls for higher taxes on assets.

The former Social Democratic (SPÖ) member of the federal parliament (MP) said yesterday (Sun) he worried about the social peace and balance in the country. Fischer said he would like to put the opinion that Austria’s rich must not be burdened with higher taxes into question. Fischer said it was “natural” to ask those who owned the most for a share as the country tries to cut its debts.

People’s Party (ÖVP) whip Johannes Rauch said today he was “surprised” by Fischer’s support for a position of the SPÖ. The conservative politician warned that higher taxes on assets would be “hostile” to Austria’s economic strength and jobs. Rauch – whose party forms a government coalition with the SPÖ which wants an increase of taxes on assets – added that the Social Democrats would not be able to garner large additional revenues by raising Austria’s tax on assets. ÖVP chairman and Foreign Minister Michael Spindelegger argued similarly some weeks ago. Spindelegger said he would avoid further strain on families and people with an average income.

Fischer was criticised during his first term as president – which started in 2004 – by many for revealing his opinion on issues of day to day politics not very often. The left-winger vowed to raise his voice more frequently in his second and final term as president of Austria after his reelection last year.

ÖVP Finance Minister Maria Fekter announced today she was “angered” by the SPÖ’s increasing calls for higher taxes on assets. SPÖ State Secretary for Finances Andreas Schieder said yesterday these taxes could be raised as early as next year given that his party comes to an agreement with its coalition partner. Some observers have said the joint SPÖ-ÖVP administration could collapse early due to disagreements regarding the country’s tax system, a possible increase of pensions and the ongoing debate about how to finance the growing public health sector expenses.

Austria rakes in comparably little from taxes on citizens’ assets, while, according to some economists, taxes on the factor labour and middle-sized salaries are too high. The alpine country’s earnings from taxes on assets resembled 0.5 per cent of its gross domestic product (GDP) in 2008. The average of the Organisation for Economic Co-operation and Development’s (OECD) 34 members was 1.8 per cent that year. Great Britain topped the ranking in this regard with 4.2 per cent followed by France (3.4 per cent).

The general tax on assets was abandoned in Austria 17 years ago. Land tax, taxes on profits made by stock market businesses and capital gains taxes and other measures are considered when Austria’s tax on assets are debated. Karl Aiginger, who heads Vienna’s Institute for Economic Research, WIFO, suggested last week Austria’s property tax could be increased. Apartments of a size of 80 square metres and less and estates smaller than 300 square metres could be spared from higher taxes, he added.

Some ÖVP officials have claimed the SPÖ tries to up the burden on savers and “those who work hard and achieve a lot for this country.” At the same time, many supporters of the SPÖ hope the party’s team of ministers will manage to convince their conservative counterparts of the necessity of higher taxes on assets. SPÖ Chancellor Werner Faymann expressed his willingness to change the tax system that way last week. The ex-traffic minister said households which owned one million Euros and more should be affected. Asked about the amount of a possible new levy, Faymann mentioned a frame of 0.3 per cent to 0.7 per cent. The chancellor and SPÖ chairman explained such a change of tax laws would help the state to extra earnings between 500,000 million Euros and two billion Euros a year. Both Schieder and Faymann explained around 80,000 households would be ordered to fork out more taxes given that the envisaged draft bill comes into effect.

SPÖ General Secretary Günther Kräuter said today he was “pleased about the growing support” among ÖVP officials for higher taxes on assets. Kräuter has been one of the most outspoken supporters of such fiscal policies. His statement came one day after Norbert Schnedl, a leading conservative trade unionist, said it “must be possible to hold a serious debate about the issue.” Schnedl, who heads the Faction of Christian Unionists (FCG), also said he considered the SPÖ was “wrong” when it assumed that the budget would be restored solely by raising taxes on assets. He suggested a debate about a possible restructure of the tax system instead of “populist” suggestions.

The ÖVP board has not yet commented on Schnedl’s suggestions which rather contradict the party’s stance on the topic. However, ÖVP Science Spokeswoman Katharina Cortolezis-Schlager hit out at the party’s coalition partner considering the situation at Austria’s universities which struggle with more students than they can cope due to low budgets. Cortolezis-Schlager claimed the Social Democrats were to blame for the “chaos” as they blocked all attempts to reintroduce tuition fees.

Meanwhile, the Austrian finance ministry has explained a system which allows wealthy citizens to give more than they had to as practised in Germany was undoable in the alpine country due to its constitution. A spokesman for the ministry said laws would not ban it from accepting any kinds of gifts. He explained that this restriction kept rich Austrians from paying higher taxes than they must.

Regulations in neighbouring Germany do not keep taxpayers from forking out extra amounts to help the state in reducing its debts and maintain services to the populace. However, reports have it that the ministry of Christian Democratic Union (CDU) Minister Wolfgang Schäuble received notably less money from moneyed Germans than expected after appeals by some millionaires to join them in doing so.