Economic evaluation and effects of property-related taxes
Austria has one of the highest tax ratios in an international comparison. In 2022, Austria ranked third among developed countries with a tax burden of 43.1% of total economic output, just behind Norway and France. Nevertheless, the introduction of a wealth tax to cover public spending and redistribute wealth is repeatedly discussed. Against this backdrop, EcoAustria was commissioned by the Julius Raab Foundation and Raiffeisenlandesbank Niederösterreich-Wien AG to examine the economic effects of introducing such a tax in Austria.
The results show that wealth taxes significantly impede the desirable accumulation of wealth. In addition, the tax hinders the establishment and continuation of companies and would therefore weaken the competitiveness of the location. With the introduction of the tax and a predicted volume of EUR 5 billion, investment activity would slow down noticeably. Compared to a situation without a wealth tax, investment would then fall by 5 percent. This would have consequences for employment and value creation. In the longer term, more than 40,000 jobs would be lost, incomes would fall by 2.5 percent and value added would be reduced by 2.3 percent.
"Contrary to empirical evidence, the desire for a wealth tax is usually accompanied by the hope of generating high revenues without negative consequences for the economy. However, this is wishful thinking without scientific justification ," explains EcoAustria Director Monika Köppl-Turyna. "A wealth tax reduces the supply of capital, increases the necessary investment income and distorts savings decisions in favor of consumption. Higher returns on capital inhibit corporate activity, while collection problems and high administrative costs reduce revenue. "
Problems with collection, high administrative costs and tax avoidance activities have also repeatedly led to low revenues from a wealth tax. These are among the reasons why most countries have long since rejected this idea or abolished existing wealth taxes.
"Instead of focusing on short-term revenue through new taxes, Austria should take a long-term view of its economic policy. What is needed are reforms that strengthen competitiveness and promote innovation. "
