Austria’s Payroll Tax Cut Plan Stirs Broad Opposition as Watchdogs Warn Deficit Will Stay Above 3%
23.06.2026 - 00:31:17 | boerse-global.de
The Austrian government’s promise to slash payroll taxes by 1.5 billion euros from 2028 is drawing fire from nearly every corner — not because businesses object to the relief, but because the way the coalition plans to pay for it has angered employers, unions, auditors, and even the central bank.
The package, tabled in the Nationalrat on June 10 by the ÖVP, SPÖ, and Neos, aims to lower labour costs for companies. Yet the financing measures — a higher corporate tax bracket and a temporarily increased bank levy — have triggered a wave of complaints that the trade-off will hurt investment, slow the energy transition, and leave low-income households worse off.
Higher Corporate Tax Funds the Relief — But Industry Calls It Poison for Investment
The headline number: a 1.5-billion-euro reduction in employer-side social contributions from 2028. To balance the books, the government will keep the standard corporate tax rate at 23 percent but introduce a new 24-percent rate for profits exceeding one million euros, starting in 2027. That step is expected to generate an extra 200 million euros in 2027 and around 350 million euros annually from 2028 onward.
On top of that, the bank levy will be temporarily raised — hitting 300 million euros in both 2027 and 2028 before dropping back to 90 million in 2029.
The Federation of Austrian Industries and the Austrian Economic Chamber both welcome the payroll tax cut but argue the corporate tax hike will chill capital spending. The Austrian Bar Association warned the move could scare off international investors.
Fiscal Watchdogs: Deficit Will Remain Stubbornly High
The Oesterreichische Nationalbank and the Fiscal Council see a high probability that Austria’s public deficit will stay well above the 3-percent Maastricht threshold through 2028. The Fiscal Council projects a deficit of 3.9 percent in 2026, improving only mildly to 3.8 percent by 2028.
To close the gap and exit the EU’s excessive-deficit procedure, the country would need an additional 5.7 billion euros in consolidation. The main drivers of the budget strain are rising spending on healthcare, long-term care, and pensions, plus growing interest payments and weak economic growth.
Audit Office Blasts Missed Reforms
The Court of Audit delivered a harsh assessment, saying the package lacks genuine structural reforms in education, energy, care, and health. Instead, it complained, the government is making the tax code more complicated.
Two specific moves drew sharp criticism. The elimination of the home-office lump-sum allowance and the removal of the tax-exempt status for electric company cars — the latter, according to the ÖAMTC, will slow the adoption of electric mobility.
The Court also flagged the second mandatory kindergarten year in Vienna, for which 80 million euros have been set aside. Experts say that sum is insufficient.
Unions: Low Earners Take the Hit, Wealth Taxes Remain Untouched
The Austrian Trade Union Federation (ÖGB) and the Chamber of Labour (Arbeiterkammer) argue the burden falls on people with modest incomes. For the third year running, family benefits will not be adjusted for inflation. They also warned of cuts to emergency unemployment assistance (Notstandshilfe).
The ÖGB renewed its demand for a wealth tax to plug the budget hole instead of loading costs onto workers.
Other flashpoints include a planned hike in alcohol taxes and changes to the pension system. The public-sector union criticized a measure that lowers the threshold for the pension security contribution from 150 percent to 100 percent of the reference amount. For affected pensioners, the union says, that could mean an extra charge of more than 1,000 euros per year.
The Seniors’ Council added its voice to the protests. With opposition from industry, labour, auditors, and the central bank, the coalition now faces the difficult task of defending its fiscal package through parliament.
