The Tax Reform 2004-05 – Measures and Macroeconomic Effects

The tax reform 2004-05 includes tax cuts within income taxation (€ –2.2 billion) and corporate taxation (€ –1.1 billion) as well as increases of several excise taxes (€ +232 million). It is realised in two steps: the first tax reform package, taking effect in 2004, was adopted by the Austrian Parliament in June 2003, and reduces the tax burden by almost € 0.5 billion. The measures of the second package, which are worth about € 2.5 billion, were adopted in May 2004, and will mostly be implemented in 2005. The total volume of the tax reform 2004-05 reaches about € 3 billion (1.2 percent of GDP) from 2007 on. The tax reform is an important element within the government's long-term strategy to bring the tax ratio down to 40 percent of GDP. According to the current Austrian Stability Programme, the tax reform will decrease the tax ratio from 43.2 percent in 2003 to 41.9 percent of GDP in 2007.