VIENNA: Austria’s government unveiled on Sunday what it calls an “eco-social” reform of the tax system, a key promise of the conservative-green coalition.

Under the measures set out at a news conference by Chancellor Sebastian Kurz and several of his cabinet colleagues, Austria will follow the example of neighbouring Germany and introduce a tax on carbon dioxide emissions.

This is to come in from mid-2022 at a level of 30 euros ($35) per tonne, rising to 55 euros by 2025. In order to offset the added cost of the measures taxpayers will receive a “climate bonus”.

Reflecting the fact that more people in the countryside rely on cars, this “bonus” will be worth 200 euros annually for those in the most rural areas but only 100 euros for those in cities.

Kurz stressed several other measures that would “lower the burden” of taxation on working Austrians, including reductions in income tax and social security contributions as well as higher tax breaks for families with children.

Corporation tax will also fall from 25 to 23 percent by 2025 to encourage post-pandemic investment.

Vice-Chancellor Werner Kogler, head of the junior Green coalition partner, described the reform as “historic” and added it would lead to “less dirt in the air but more money in people’s pockets”.

An environmentally friendly tax reform had been one of the key pledges in the coalition agreement reached in January 2020 between Kurz’s right-wing People’s Party (OeVP) and the Greens.

Environment Minister Leonore Gewessler told reporters the tax reforms were the results of “long nights” of discussions between the two parties in recent days in which the details were thrashed out.

Green pressure groups gave the reforms a cool reception, with WWF Austria calling them a “weak compromise” and saying the measures had to be “much more ambitious in order to effectively reduce emissions”.

Published in Dawn, October 4th, 2021