Areas of Strength
- Austria comprehensively reports on tax expenditures and has a strong legal and procedural framework in place for evaluating subsidies. Ex ante and ex post impact assessments are required for direct subsidies and tax expenditures. The quality of evaluations however varies, especially for tax expenditures, limiting meaningful assessment. The Court of Audit has called for more systematic evaluation and better integration of results into the subsidy report (Förderungsbericht), so that tax expenditures can be scrutinised on par with direct spending.
- Austria has made progress in the digital transformation of its tax administration. Austria has implemented measures concerning digitalisation as part of its commitments under its Recovery and Resilience Plan (RRP). In addition, Austria’s tax administration pre-fills personal income tax (PIT) returns, and the percentage of total PIT returns submitted electronically has increased significantly in recent years.
- Austria has a very low VAT compliance gap. It declined to 1% of VAT Total Tax Liability (VTTL) in 2023, down from 3% in 2022 and significantly lower than in 2019 (6.8%). Austria’s shadow economy is one of the smallest in the EU, estimated at 6.6% of Austria’s GDP.
Areas for Improvement
- Austria’s efforts to monitor compliance gaps are so far focused on VAT. Austria does not produce, for the moment, gap estimates for corporate income tax (CIT) or personal income tax (PIT). Estimating CIT and PIT compliance gaps could help policy makers understand the nature and magnitude of the problems related to CIT and PIT tax collection. In addition, measuring and monitoring tax compliance gaps can support tax administration in assessing the effectiveness of their tax policy actions.
- Tax expenditures are relatively large and increasing. In 2023, they amounted to EUR 25.5 billion, or about 5.2% of GDP, although close to one third of tax expenditures could not be quantified. This represented an increase of 8.6% compared to 2022. In a context of relatively high tax code complexity, further strengthened evaluation could help identify tax expenditures that no longer reach their intended policy objectives, also in light of a country-specific recommendation to improve the tax mix.
Tax Complexity
Austria ranks 13th out of the 27 Member States in the Tax Complexity Index (‘TCI’), where a higher rank corresponds to lower tax complexity. The TCI is based on the Global MNC Tax Complexity Project, a joint research project of Deborah Schanz (LMU Munich) and Caren Sureth Sloane (Paderborn University). These results suggest that multinational corporations find a moderate level of complexity in Austria’s CIT system. In particular, the TCI 2024 places Austria 12th among the Member States with regards to Tax Framework Complexity, and 22nd with regards to Tax Code Complexity. This indicates that, whereas the performance is better in terms of tax processes carried out by the tax authorities, there is room for improvement with regards to the structure of the tax regulations (particularly concerning the regulations to combat the shifting of profits to companies, according to the authors).
The full Commission Staff Working Document of the Mind the Gap Report - Challenges and opportunities for tax compliance and tax expenditure in the EU regarding Austria can be found here.
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