Part II

Developments in the Member States

Austria

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Overall trends in taxation

Structure and development of tax revenues
In Austria, the overall tax burden (including social contributions) is at 42.0 % more than six percentage points of
GDP above the EU average (EU-27 35.6 %), with only the Nordic Countries, Belgium, France and Italy recording
higher rates.
Austria derives 35.0 % of tax revenues from indirect taxes (EU-27 38.6 %), of which VAT accounts for more than
half. Austria raises a substantial amount from other taxes on production (7.7 % of total taxation, EU-27 3.9 %), in
particular from an employers contribution to the fund for equalisation of family burdens and a payroll tax payable
to communes. By contrast, excise duties account for relatively little revenue. This reflects the moderate rates
imposed, in particular on alcoholic beverages. Direct taxes account for a proportion of revenue (30.3 %) in line
with the EU average of 30.4 % of total taxation. Compared to the EU-27 average, PITs contribute more heavily
(23.2 %, EU-27 20.6 %) to total tax revenues than CIT (4.8 %, EU-27 7.6 %). Social contributions account for
more than one third of total tax receipts (34.9 %, EU-27 31.1 %).
Among the EU countries with federal public finance systems, Austrian states receive the lowest proportion of total
tax revenues (less than 10 % as against around 20 % in Belgium, Germany and Spain). The share of local
governments (11.8 %) is slightly above the EU-27 average (10.6 %). The 2009 increase in tax shares of lower
levels of government is due to an increased share in revenues agreed as part of the financial equalisation procedure,
replacing former transfers to lower levels of government. The 2009 increase in tax shares of lower levels of
governments is however a statistical artefact, as some former transfers from the federal budget to the lower levels
(dependent on overall tax revenues) are now directly booked as tax revenues of these authorities.
The peak total tax revenues of 44.9 % of GDP in 2001 were the result of the political goal of achieving a balanced
budget position. Despite a considerable economic slowdown, base-broadening measures and above all significantly
increased tax pre-payments, stimulated by the introduction of interest charges on tax arrears increased tax
revenues. Reforms enacted since then resulted in a continuous decline of the tax-to-GDP ratio until 2006. In
particular the two steps of the tax reform 2004/05, focusing on the reduction of wage and corporate taxation, led to
an estimated tax relief of about 3 billion (1.2 % of GDP). The renewed increase of the tax-to-GDP ratio by more
than one percentage point to 42.7 % of GDP from 2006 to 2008 was rather due to the strong economic growth
(increases in the wage sum and sustained corporate profits) than significant changes in the tax system. In 2009, the
pertained high overall tax ratio in percent of GDP, at 42.6 % despite a tax reform targeting an annual tax relief of
about 1.1 % of GDP, was the result of stable domestic demand and a decrease in GDP. Indirect taxes but also SSC
increased both in nominal terms and as GDP was falling even more considerably in percent of GDP while only
direct taxes fell due to the enacted PIT reforms and temporary CIT measures. The drop of the tax ratio to 42.0 % in
2010 can largely be attributed to negative composition effects (slow wage-sum growth) and some tax cuts (full
effect of the 2009 PIT reform), although profit-related taxes rebounded somewhat from their depressed crisis
levels.
Taxation of consumption, labour and capital; environmental taxation
Taxes on consumption as a percentage of GDP (11.8%) are in line with the EU-27 average (11.9 %). The decrease
in the implicit tax rate on consumption to 21.4 % in 2010, which brings it back in line with the increased EU-27
average of 21.3 %, was not due to rate reductions or base narrowing measures.
Taxes on employed labour represented 21.3 % of GDP in 2010, constituting around one half of the total tax
burden. As in most EU countries, the tax burden on employed labour consists to a high degree of social security
contributions. In addition to the personal income tax, levied in the form of a withholding tax on wages and salaries,
indirect labour taxes such as the contribution by employers to the Family Burdens Equalisation Fund and the
payroll tax also contribute substantially to the labour tax burden. The Austrian implicit tax rate on labour was

Taxation trends in the European Union

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