Economic and fiscal effects of the eco-social tax reform

The economic research institute EcoAustria has finalized a study on the economic and fiscal effects of the tax reform, which has two main objectives: CO2 pricing and a reduction in the tax burden in Austria. The introduction of CO2 pricing starts with a price of 30 euros per tonne of CO2, which is set to rise to 55 euros by 2025 according to the current plans.

The taxation is in addition to existing taxes on energy sources, such as the mineral oil tax, which already tax CO2 emissions, at least indirectly. This study concludes that the additional CO2 tax for 2025 is higher than the international average. Special burdens are cushioned by exemptions.

Firstly, to relieve the burden on private households and companies, the revenue from the CO2 levy will be refunded to private households in the form of the regional bonus. Secondly, the burden on private households will be eased, for example, through further steps in the income tax reform, an increase in the family bonus and a reduction in health insurance contributions. For companies, a reduction in the corporation tax rate and measures to promote investment are planned.

In line with the gradual increase in CO2 pricing, revenue from the levy will also increase gradually. According to the calculations in this brief study, the revenue should amount to around 550 million euros for the second half of 2022 and increase to around 1.8 billion euros by 2025.

The carbon leakage regulation, the hardship provision and the agricultural refund reduce the revenue, so that a net amount of around EUR 1.5 billion is expected in 2025. The ecological tax reform with associated tax relief will result in a significant increase in value added and employment. As a result of the tax measures, real GDP will be around 0.5% higher in 2022 and just under 1% higher in 2025 than in a situation without these measures. This corresponds to a GDP increase of EUR 2 billion and EUR 4 billion respectively.

This is also associated with a significant increase in employment, which will be around 0.7% or over 30,000 people higher in 2025 than without the reform. The measures will result in a significant reduction in the tax ratio, which according to the calculations will be around 0.9 percentage points lower.

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