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New budget slashes payroll taxes but raises corporate levies and slows pension growth

Workers get tax relief, but companies and pensioners bear the cost. Will the trade-off stabilize the economy—or spark backlash?

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2 min read
The image shows a bar chart depicting the top five current account deficits in 2012. The chart is...
The image shows a bar chart depicting the top five current account deficits in 2012. The chart is accompanied by text that provides further details about the deficits.

Summary

  • Payroll taxes will be cut by one percentage point in 2028, offset by higher corporate taxes for large businesses and an extended bank levy.
  • Pensions are set to rise below the inflation rate once again. However, details on pensioners' "solidarity contribution" remain unclear.
  • No wealth-based taxes are planned, but a mandatory second year of kindergarten, along with investments in early childhood education and long-term care, are included.

What's Coming?

New budget slashes payroll taxes but raises corporate levies and slows pension growth

"Upswing. Justice. Reforms"—these three watchwords define the government's new two-year budget for 2027 and 2028. Behind them lies a €5 billion package designed to bring Austria's turquoise-red-pink coalition back in line with EU Maastricht criteria through new revenue and reduced spending.

The rules require a maximum deficit of 3% of GDP. "This is not just any budget. This is the budget that will take us out of the excessive deficit procedure," Chancellor Christian Stocker declared at the government's Monday evening presentation.

  • Pensioners will be asked to make a "solidarity contribution," Foreign Minister Beate Meinl-Reisinger announced. The exact form remains unclear, but:
  • Next year's pension adjustment is expected to fall roughly 0.25% below inflation, Finance Minister Marterbauer said, saving €280 million in 2027 and €270 million in 2028. A final agreement has yet to be reached. "We still need to work this out with pensioner associations," Marterbauer added.
  • The so-called "factor labor" will see relief: Payroll taxes are set to drop by one percentage point to 2.7% in 2028—a €2 billion measure. Stocker called it a "historic step." Specifically, the Family Burden Equalization Fund (FLAF) will be reduced by one percentage point, accounting for around €500 million in savings.
  • "Businesses will fund this measure themselves," Vice Chancellor Andreas Babler noted Monday evening, as the corporate tax (which he referred to as the "conglomerate tax") will rise in return. The previous turquoise-green government had cut it from 25% to 23%; now, larger companies will face an increase. Labor-intensive industries will benefit more from this trade-off than capital-intensive ones.
  • A labor market reform is expected to save around €1 billion, though specifics were not disclosed Monday evening.
  • A waiting period for welfare benefits will be introduced, paired with an integration program.
  • The bank levy, already raised in 2025, will be extended.
  • A mandatory second year of kindergarten will be introduced, with €200 million each allocated to early childhood education and long-term care.

What's Not Coming?

  • Long-debated wealth-based taxes—including inheritance, gift, and property taxes—will not be introduced.
  • Defense spending remains unaddressed in the current budget.

Fewer details were provided Monday evening. "This is just an interim step," Marterbauer emphasized. Further specifics are expected in his budget speech on June 10.

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