7 August 1999 • Overview on Measures of the Year-2000 Tax Reform • Gerhard Lehner

In June 1999, the Austrian Parliament adopted the year-2000 tax reform, which will take effect as of the beginning of the year 2000. It will reduce the tax burden by about ATS 32.5 billion, i.e., more substantially than the 1988 and 1994 tax reforms.

The reform is focused on two priorities: first, adaptations of the wage and income tax-rate table; second, measures in the field of taxation of enterprises. Moreover, the system of tax privileges for private provision for old age will be improved and a new regulation will apply to the taxation of capital gains from the disposal of securities.

As regards the wage and income tax brackets, marginal tax-rates will be reduced from 22 to 21 percent, from 32 to 31 percent, and from 42 to 41 percent; furthermore, the standard tax credit will be increased from ATS 8,840 per year to ATS 12,200 per year, with the amount of tax credit declining for higher incomes.

These measures will ease the burden on the tax payer by ATS 4,000 up to 7,000 a year. About two thirds of the entire reduction of the tax burden will benefit people earning incomes of less than ATS 23,000 per month.

Through these measures, the tax burden on the majority of incomes will be lowered in real terms.

Regarding the taxation of enterprises, the tax reform 2000 package contains two new provisions: on the one hand, interest payments on own equity will be taken into consideration for taxation purposes, and on the other hand, a tax allowance of ATS 5 million will be introduced for inheritance (gift) tax in the case of enterprise transfers.

Moreover, the research contribution and the apprenticeship allowance will be increased.

Private provision for old age will be promoted through a premium comparable to that granted to building-society savers.

As regards the taxation of capital gains from the disposal of securities, the retention period will be prolonged from one year to two years. If securities are sold within the retention period, profits will be taxed at a rate of 25 percent.