Brief analysis 3: Reduce tax burden, achieve better performance

Austria's economy is currently growing more slowly. Added to this are uncertainties from abroad, such as weak growth in Germany, the unclear outcome of Brexit and increasing trade conflicts worldwide. This makes it all the more important to strengthen the competitiveness of the local economy and thus lay the foundations for more growth and prosperity. The tax rate plays a central role here, as the burdens on labor and companies are too high in international comparison. "Adjusted for purchasing power, every Austrian pays an average of around 16,170 euros in taxes per year, which is around 1,120 euros more than their neighbors in Germany and 4,080 euros more than the EU average. This considerably restricts the consumption options of private households," says Tobias Thomas, Director of the economic research institute EcoAustria.

"Regardless of who wins the National Council elections, it would be good for Austria as a business location if the high tax burden on employees and companies were significantly reduced. In addition to self-financing, the reform should be financed through efficiency potential on the expenditure side," says Thomas. And there is considerable potential for efficiency. The new EcoAustria Europe Benchmarking shows that Austria is among the leaders in Europe in terms of public spending in many areas, but often only achieves mediocre results in terms of impact. "If we succeed in leveraging even part of the efficiency potential, better public services are possible at lower expenditure," says Thomas.

Adjusted for purchasing power, administrative personnel and material costs in Austria amount to 822 euros per year and inhabitant. In terms of the quality of public administration according to the World Bank's WGI index, however, Austria is only in the upper midfield with an index value of 1.44. Denmark, with only 557 euros per capita and year, i.e. 265 euros less, scores 1.67 points and thus a significantly better result in terms of the quality of administration. And the Netherlands also achieved 1.67 index points with purchasing power-adjusted expenditure per capita and year of just 483 euros. That iseven 339 euros less than in Austria.

In the school system, education expenditure in elementary, primary and secondary education per pupil in Austria amounts to EUR 9,373 per year, adjusted for purchasing power. This gives Austria 492 points in the OECD's PISA test. In comparison, the Netherlands, with expenditure of EUR 8,273, i.e. EUR 1,099 less per pupil and year, achieved a test result of 508 PISA points. The difference in efficiency is even more striking when compared to Finland. With total expenditure of just EUR 7,733, i.e. EUR 1,640 per pupil and year less than in Austria, the Finns achieve a full 523 PISA points.

Adjusted for purchasing power, healthcare expenditure in Austria amounts to EUR 3,932 per capita per year. In terms of average life expectancy, Austria thus reaches 81.7 years. Finland achieves the same output value with expenditure per capita of 3,020 euros, i.e. 911 euros less. The comparison with Spain is even more striking: Spain achieves an average life expectancy of 83.4 years with health expenditure per capita of EUR 2,398 adjusted for purchasing power, i.e. EUR 1,534 less.

The results in detail are available in EcoAustria Policy Note 35: "EcoAustria Europe Benchmarking: Achieving better performance with less expenditure" published today.