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Austria Gives Go-Ahead To Bank Tax

Wednesday, February 24, 2010

Following the recent banking summit, and despite bitter opposition from its banks, the Austrian government has announced its decision to introduce a bank tax in Austria. According to Finance Minister Josef Pröll, it is merely a “question of justice”.

Austria’s Chancellor Werner Faymann has confirmed that the introduction of a bank levy is now inevitable, with or without backing from the European Union regarding a Europe-wide tax.

Although the precise details of the tax have yet to be determined, Faymann has made known that the new levy could be introduced from as early as 2011. Determined to consolidate the country’s budget, Pröll is eager to implement the new levy as quickly as possible.

Proposals put forward by Chancellor Faymann include imposing a levy of between 0.07% and 0.1% on the taxable base. Other details, such as who is to pay the tax, and what the basis for calculating the tax will be, as well as the exact tax rate, have yet to be decided. As a benchmark, Faymann has proposed generating a volume of around EUR500m annually.

A working group consisting of representatives from the Chancellery, the finance ministry, issuing banks and other banks, will be set up in order to put forward proposals and to firm up details for the new tax. Nevertheless, Chancellor Faymann has underlined the fact that ultimate responsibility rests with both the government and parliament.

Having agreed in principal to the tax, Josef Pröll once again warned of the dangers of imposing too great a burden on the country’s financial institutions, and reiterated that the burden must not be borne by either savers or borrowers. According to Pröll, the greater the pressure imposed on the banks, the greater the pressure to pass that burden on.