Tax Reform 2022-2024 – Sectoral Effects

This paper presents an ex-ante estimate of the long-term effects of the 2022-2024 tax reform, focusing on the effects at the industry level. The starting point for the estimates is an average annual reform volume of 5.6 billion € until 2026. This results from additional revenue from the CO2 pricing of 1.7 billion € and a reduction in taxes for companies and households totaling 7.3 billion € (including lump-sum "climate bonus" payments to households). Estimates using the global input-output model ADAGIO show an expansionary effect of the reform of around 0.8 percent of GDP; employment is 0.6 percent higher in the long term than in the baseline scenario. The structure of the tax reform implies a worsening of the competitive position and hence a reduction in the production value of energy-intensive sectors, while services, especially consumer-related industries, can record relative gains. One of the main reasons for these sectoral differences is the introduction of a CO2 price for sectors not covered by the EU ETS that will amount to 55 € per t by 2025. According to the model estimate, this leads to a decrease in total CO2 emissions of around 5 percent – a noticeable decrease, but nevertheless only a moderate contribution to the achievement of Austria's climate targets.