The Contribution of the Austrian Tax System to the Socio-ecological Transformation

The tax system is facing major transformation challenges. Taxes play an important role in climate and environmental policy, both as an instrument for financing public services in general and climate and environmental policy in particular, and as a steering instrument. In relation to GDP, revenues from environmental taxes in Austria in a narrow sense has remained constant and is below the EU average over the long term. In contrast, environmentally relevant payments to municipalities (e.g. wastewater or waste charges) and other governmental levels have gained significantly in importance. With the introduction of a CO2 price in 2022, Austria is catching up with the growing group of countries that use CO2 pricing as an instrument of climate policy. Future reforms should aim at a more comprehensive contribution of the tax system to the necessary socio-ecological transition, going beyond the current focus on climate policy objectives. In particular, as part of a broader mix of measures, the tax system should help curb resource use (including soil as a resource), protect biodiversity, and support the circular economy. This also requires greater use of transformative taxes and levies at the subnational levels.