Budget debate: Government plans savings, but where is the justice?

Budget debate: Government plans savings, but where is the justice?

The current budget speech announced far-reaching changes for the Austrian population. Finance Minister has taken measures involving both savings and investments to promote budget consolidation. In this context, the Austrian Trade Union Confederation (ÖGB) is calling for a fair distribution of the burden, especially by including broader shoulders in the process. The increase in the bank levy, the more intensive participation of energy companies in budget restructuring and the extended top tax rate for incomes over one million euros are rated particularly positively.

Other positive developments include an increase in foundation taxes and investments in active labor market policy, which includes measures such as the “Aktion 55Plus” initiative. A compulsory second year of kindergarten is being introduced in the education sector, and new measures for women's health are being developed in the healthcare sector. In addition, the “Clean Austria” initiative is intended to help shift freight transport to rail.

Critical points of the budget speech

However, critical points were also raised in the budget speech. Savings in pensions, family benefits and the climate bonus are the focus of criticism. It is noted that the climate bonus is not fully compensated, especially for tenants who rely on oil or gas. The suspension of a third of the “cold progression” is also controversial and considered incomprehensible. Important family benefits such as the child tax credit and family allowance are not valorized, which particularly affects low-income households.

In addition to criticizing the savings measures, the ÖGB is calling for larger companies to participate in budget consolidation. One point that deserves particular emphasis concerns the corporate tax cut from 25 to 23 percent, which takes over a billion euros out of the budget every year. The ÖGB advocates the implementation of wealth and inheritance taxes in order to distribute the financial burden more fairly.

Outlook on the government program 2025-2029

The government program stipulates that the corporate tax rate remains at 23 percent. An extension of the top income tax rate of 55 percent by four years until 2029 is also part of the strategy. From 2025, a tax-free bonus of up to 1,000 euros will be introduced for employees. This allows companies to create incentives without being bound by a collective agreement.

Another important project is the introduction of a new additional income model for people in real old age pensions from 2026, whereby the additional income is subject to a flat rate of 25 percent withholding tax and is exempt from social security. Employer contributions to pension and health insurance should also be halved. In 2025, a dedication levy will also be introduced as part of the real estate income tax in order to record dedication profits more effectively.

The government also plans to evaluate the depreciation periods for realistic useful lives, particularly with regard to renovation investments, and the implementation of the EU FASTER directive to simplify cross-border withholding tax refunds is being pushed forward. These changes cast both light and shadow on the coming challenges in Austria's economic and social structure.

In summary, the budget is a step in the right direction to create more distributive justice, but significant social imbalances remain, which primarily affect employees and lower-income groups. The ÖGB will continue to advocate for fair contributions for all population groups.

For further information please visit the website of ÖGB and EY.