The Austrian Parliament has passed an eco-social tax reform with billions of euros in relief for employees and companies.

While the opposition criticized lower taxes for companies and higher costs for petrol, Finance Minister Magnus Brunner (ÖVP) praised the turquoise-green coalition for its "huge, unbelievable tax reform".

Together with ecological incentives, taxpayers would be relieved by 18 billion euros by 2025 - six times more than planned in Germany.

Andreas Mihm

Business correspondent for Austria, Central and Eastern Europe and Turkey based in Vienna.

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A tax on the emission of carbon dioxide (CO2) will be introduced.

It will increase from initially 30 to 55 euros per tonne by 2025. In return, citizens will receive a climate bonus of up to 200 euros per person per year - children will get half that.

The amount depends on where you live.

It is all the higher, the worse the connection to public transport.

In Vienna, the bonus is therefore the lowest at 100 euros.

In centers like Graz, Linz or Salzburg it is 133 euros.

Depending on the location, it then rises to 167 euros or 200 euros.

On average, citizens are reimbursed more than the tax costs them.

Austria is thus taking a different path to Germany, where the revenue from the CO2 tax finances climate policy expenditure, such as reducing the EEG surcharge or higher housing allowances. 

The account details for the payment are still missing

In Austria, 1.25 billion euros are to be paid out to citizens this year. Since the tax will not be levied until July and will bring in only 500 million euros, the budget deficit is increasing - someone has to pay for the costs, in the end it's the taxpayer. By 2025, the climate bonus and other relief will add up to 6.4 billion euros. That is 40 percent more than the revenue from the CO2 tax calculated at 4.6 billion euros. The revenue from the CO2 tax should not exceed the climate bonus until 2025. 

The new tax also means more bureaucracy.

The payment of the climate bonus poses problems for the Ministry of the Environment because it needs the account details of all citizens but does not have them.

The Ministry of Finance was granted 65 new posts to handle the CO2 tax.

The Court of Auditors warned against duplicate structures. 

Families and the self-employed benefit the most from the tax reform.

In the best case, the relief per person is up to 2,200 euros, according to Parliament's budget service.

Overall, the finance minister will forego income of 2.5 billion euros this year.

By 2025, the relief for taxpayers will increase to 5.6 billion euros, mainly because of the reduced income tax rate.

The child allowance (family bonus) increases. 

100 percent green electricity by 2030

After the marginal tax rate for the first tariff level had already fallen to 20 percent in 2020, the marginal tax rates for the second and third tariff levels are now gradually falling from 35 to 30 percent and from 42 to 40 percent, respectively. For incomes below 1100 euros, the health insurance contribution decreases. Companies are also less heavily burdened. The corporate tax rate will fall in two steps from 25 to 23 percent. As a rule, it is already below the tax level of German companies, since there is no trade tax in Austria.

Parliament also decided on changes to the reform of the expansion of green electricity, which made specifications from the EU Commission necessary.

This had criticized the plans for detailed tenders for the expansion of wind, photovoltaic or hydroelectric power plants.

For the implementation of the law, with which the power supply from 2030 - based on the year - is to be based entirely on green electricity, many implementing regulations are still missing.

Currently, 60 percent of the generation comes from hydropower and 15 percent from other regenerative sources, the rest is accounted for by gas-fired power plants, which recently contributed to a significant price increase on the electricity market.

One reason for this was that since the market was divided up in 2018, less cheap green electricity from Germany has passed through the scarce transition points at the border.