29 Jan

The eco-social tax reform is to bring a total of 18 billion euros in relief by 2025.

It remains to be seen whether 20 January 2022 will be a milestone in Austrian social and financial policy, or will just go down in history as another day that once again only produced a toothless and ineffective law. Admittedly, what was formulated here sounds good and the neo-finance minister Magnus Brunner said that "one of the central projects of the federal government has been brought to the ground, which will also bring 30,000 additional jobs!

So it was on 20 January 2022 that the Austrian National Council passed the Eco-Social Tax Reform 2022. By a majority, mind you, which is not an everyday occurrence. While the governing parties speak of the "biggest tax relief of the Second Republic" or of a "revolution of the tax system", the commentary from the ranks of the opposition sounds somewhat harsher. The SPÖ, for example, demanded even higher taxation of assets and the NEOS even want to abolish the cold progression. For the FPÖ, on the other hand, everything once again seems to be just lies and deception on the part of the government. Well, let us perhaps look a little closer. Maybe we will actually discover one or two revolutionary things about the story.

At a time when great things could indeed be achieved with revolutions, the Geneva writer and philosopher Jean-Jacques Rousseau put it aptly in the late 18th century: "The money one possesses is the means to freedom, that which one pursues is the means to servitude." Politicians know the power of money when it is in the possession of the little man. It creates social peace, secures votes and boosts GDP because it is generously carried into the country's shops and spent. Which, by its very nature, is one of the most essential aspects of tax relief. But money that is withheld from the population, taken away or that is thought to be unfairly distributed can quickly become a weapon. Resentment and existential fears among the people are certainly not suitable means of maintaining calm in the country. Accordingly, tax relief is a good thing. Something that - if designed fairly - can have an effect in many places.

The measures that were decided in January and which are now to be implemented successively over the next few years are, on the one hand, precisely formulated and manageable, and on the other hand, still vague and unclear as far as their implementation is concerned.

The clear release regulation, for example, probably concerns the reduction of wage and income tax in the second and third tax brackets. This is a good thing, as it actually leaves valuable euros in taxpayers' pockets. The self-employed can look forward to reduced health insurance contributions, the basic allowance for profits will be raised and even the corporate income tax for companies, which has been incurably excessive for many years, is to be reduced. For families, there are tax sweeteners in the form of an increase in the family bonus plus and the additional child allowance. So far, so good. These are percentage improvements that will actually be measured in real money. The social part of the eco-social tax reform.

What all this has to do with ecology is made clear by Vice-Chancellor Werner Kogler in his speech to the plenary, in which he speaks of the "introduction of irreversible mechanisms through CO2 pricing". This also refers to the introduction of the so-called CO2 price, which climate-damaging energy sources will have to pay from 2022. On the one hand, these revenues are to finance the measures of the tax reform, but on the other hand, they are to be distributed back to the people in our country through the additionally created "climate bonus".

But where will this money come from? Werner Kogler already gave the answer in his speech during the reform debate. The polluters will pay, i.e. those who obtain energy from environmentally harmful fossil sources. In part, that means all of us. We who buy petrol at the filling station or still heat with heating oil. Of course, the price increase is supposed to stimulate a rethinking process and lead us all to greater environmental awareness. Whether the tax relief and, above all, the time it takes for the money to reach each individual is sufficient to afford expensive investments in mobility and housing in the short term remains questionable.

The introduction of the Co2 price on fossil fuels such as fuel or heating oil, which will rise in stages from 30 euros per tonne to up to 55 euros per tonne by 2025, should and will benefit us in a roundabout way. And the necessity of these measures is anything but questionable in view of the dramatic climate changes on our planet.

The payment of the climate bonus is planned for the second half of 2022. However, it does not yet seem to be fully defined how the whole thing is to be carried out and who is responsible for it. What is fixed is that every Austrian who has been ordinarily resident in Austria for at least 183 days is eligible. Unfortunately, not everyone has a bank account to which one could simply transfer money. Moreover, it was discovered with astonishment that not all people in our country are registered with their data. The responsible Minister for the Environment, Leonore Gewessler, will probably have to have intensive talks with the registration authorities of our country.

From the ranks of the SPÖ, one would have liked to gain revenue from higher taxation of capital and assets. Despite all the measures to relieve people's tax burden, which are to be welcomed, nothing has been done here again from the point of view of the Social Democrats. On the contrary, the reduction of taxes for large corporations, which was not made public, is a sour note for many at a time when both private individuals and companies urgently need money to invest in renewable energy sources. Other opposition parties such as NEOS and FPÜ are also unhappy with the package. Well, you can't please everyone, but you should listen and at least discuss one or two points.

Be that as it may, the climate bonus should benefit us all. We will see when and how. According to Kogler, this bonus, which will amount to between 100 and 200 euros for adults, is primarily intended to cushion the significantly increased energy prices. "The good will be relieved, the harmful will become more expensive," says the Vice-Chancellor.

The reform also includes several other measures, which interested parties can read in detail in the text of the law. Implementation is to take place in stages up to 2025, and it will be interesting to see what effect this eco-social package will actually have. For us humans, but above all for our environment and the climate.