In today’s interconnected world, many policy areas cannot be tackled on a national level alone but, due to their cross-border aspect, require the cooperation of all parties involved in order to achieve a common purpose. Examples are the Single European Market, the strengthening of the European economy through the introduction of the Euro, the cooperation in external border control (Schengen), police and judicial cooperation in criminal matters as well as environmental and transport policy. In other policy areas, Europe must speak with one voice in order that its concerns are heard. The common trade policy, the external representation of the European Union in international institutions or the common security and defence policy are examples of such areas. Due to these reasons, it is important for Austria to use her opportunities for actively participating in and shaping European institutions.
The global economic slowdown, the future demographic challenges and climate change reveal how important it is for a small, open and export-orientated economy like Austria to be part of the European Union at large and the Eurozone in particular. The advantages of the Austrian membership to the EU have become clear since the accession of Austria in 1995 and, in particular, since the enlargement of the EU in 2004.
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Development of chosen indicators (1995-2010)
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EU membership and the fall of the Iron Curtain in 1989 accounted for 0.5 to 1 percentage points of Austria's GDP growth between 1995 and 2005, which would be 20% to 40% of overall GDP growth in that period. It is expected that as of now there are only little additional effects on the growth dynamics, but identical growth rates apply to a higher GDPlevel and thus the benefits for Austria are further increasing. As a main indicator, since 1995 real GDP has grown on average around 2.4% per annum. Furthermore, GDP per capita by purchasing power parity increased by around 63%, from 19,800 Euros (1995) to 32,300 Euros (2008) and reflects a rise in prosperity. Despite the current unfavourable conditions and a predicted downturn of 0.5% (2009), GDP development will return to the positive trend of recent years with a forecast real growth rate of 0.9% in 2010.
The accession to the European Union opened additional export opportunities for Austria, and export volume rose from approximately 42 billion Euros (1995) to over 114 billion Euros (2007). The export share for goods and services increased from 35.1% to 58.3% of GDP over the same period. Austrian intra-EU exports currently (August 2008) account for 57 billion Euros, representing around 70% of the total export volume. Since EU enlargement in 2004, Austrian exports to the Central and Eastern European states grew from 15 billion Euros (2004) to approximately 21 billion Euros (2007). The global cyclical downturn has reduced the demand in export markets; however, the perspectives for growth in Austria will remain sturdy after a marginal slump of 0.5% in 2009 and a pick-up of 1.4% in 2010. Since 1995, the Austrian trade deficit narrowed from 6.4 billion Euros to 0.5 billion Euros (2006) and in 2007, a trade surplus of 425 million Euros was achieved.
As a consequence of the growing economic integration in Europe, Austrian businesses, banks and insurance companies used the opportunities for growth in the developing markets of the Central and Eastern European states. With over 10% of foreign direct investment stock, Austria is the third largest investor in the region. Since 1995, the Austrian active FDI stock grew from 8.7 billion Euros to 105.1 billion Euros (2007) worldwide, while the passive FDI stock increased from 15.7 billion Euros to 106.1 billion Euros (2007) over the same period. Austria is an attractive location for businesses, not least because of its geographical position, the good infrastructure and the high level of qualification. Over 1,000 international companies coordinate their activities in Central and Eastern Europe from Austria, around 300 corporations have their Eastern European headquarters in Austria and approximately 40 international institutions with links to Central and Eastern Europe have their headquarters here. |
The steering and controlling instruments of the Stability and Growth Pact have strengthened the resistance of the Austrian economy against external shocks; for instance, the commitment to sound and sustainable public finances created the budgetary framework required for the current necessary measures. Since 1999, the relative public debt in Austria was reduced from 67.2% to 59.5% of GDP (2007). Furthermore, the annual Maastricht deficit decreased from 2.4% to 0.4% of GDP (2007). The monetary union and the success of the common currency provide additional security in turbulent times, enhancing the authority of the Eurozone and its member states such as Austria in the global economic and financial system.
Europe is setting trends in refining the international financial architecture. This is urgently needed as markets can only work with clear and transparent rules. Given its experience, the EU can take a leading role. A unified Europe is now needed more than ever, and Austrians as well as Europeans expect its strength to be further developed.
AUSTRIA: A THOROUGHLY ATTRACTIVE BUSINES LOCATION
When an international company is looking for a launching pad in a special region, numerous factors are examined and their importance for the company is evaluated. These factors include infrastructure, the social situation and the labour market as well as the education and wage levels, the framework conditions for research and development, the quality of life, civil and tax law framework conditions and the political situation.
In almost every area, Austria achieves peak values in international comparison. The purpose of this paper is to highlight some of these factors.
Tax burden
The tax regime for corporations is extremely advantageous. In addition to the low nominal tax rate, numerous depreciation allowances exist, exemptions and bonuses as well as time-unlimited possibilities for loss utilisation. The nominal tax rate is thus lowered from 25% to an effective value of 21.6%. The regime for group taxation, which exists since 2005, allows the utilisation of loss of foreign group members and the possibility for amortisation and depreciation when a company of the group acquires majority shares.
Numerous special allowances also exist for other types of enterprises, such as the preferred taxation regime for benefits which are not withdrawn and the transfer of undisclosed reserves.
Some taxes, which are levied in comparable states, do not exist in Austria, such as the trade tax, the inheritance and gift tax or the wealth tax.
A modern and effective legal protection system grants a high level of security for businesses.
Research and Development
Austria is an excellent location for innovation. The overall expenditure for research in Austria amounted to 2.63% of GDP in 2006, representing an increase of 5% as compared to 2005. Austria promotes research and development via direct aid (through means of the Industrial Research Promotional Fund and the Austrian Science Fund or the Austrian Research Promotion Agency) as well as indirectly through fiscal stimuli for enterprises which meet research expenses (different allowances and bonuses for research). The part of Austrian universities, university hospitals, Fachhochschulen (universities for applied science) and the Austrian Academy of Science should not be neglected. Today, the research rate is approximately 2.63%, around 7.5 billion Euros. According to the growth comparison chart of the Innovation Scoreboard of the EU, Austria is in third position after Luxembourg and Denmark.
Employees
The Austrian work climate is characterised by consensus. The economic and social partnership, responsible employee representatives and the political and social environment give employers the best possible security for planning. The number of strike minutes per employee has been nearly zero for many decades.
The productivity of the Austrian employee is high. With $42.11 of GDP per employee per hour, Austria is positioned among the top ten nations (in comparison: $43.99 for the U.S. at rank 6). Unit labour costs in the manufacturing sector were decreased by 17.4% between 1995 and 2005. The Austrian employees are very well trained and staff members with good IT knowledge are sufficiently available on the market (source: World Competitiveness Yearbook 2007). Education allowances and tax deductible education bonuses promote education and further training for employees. Additionally, different institutions grant direct subsidies and aids.
Quality of life
The quality of life in Austria is high: numerous cultural events and a healthy and natural environment are met by a low crime rate and high personal safety. Living costs are low and sufficient housing offers available.
There is no doubt that Austria’s future as a business location lies in the growth and sustainable development of its companies. In order to keep Austria attractive, the reform path of recent years needs to be continued. Promoting the Austrian economy means innovation in research and further positive development of the labour market. The federal government is aware of its responsibility towards the Austrian population. In the European context, all necessary steps will continue to be made in order to give people security and to ensure stable economic development of Austria in the interest of the citizens.
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Comparison of nominal and effective tax rates
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THE TAX OFFICE ON THE INTERNET – www.finanzonline.at
Since the beginning of 2003, tax procedures can easily be carried out from home with the click of a mouse. Already, 1.8 million participants (citizens and businesses) have saved time and money through the use of this service of the Federal Ministry of Finance since September 30, 2008. The financial administration does not invoice costs for the transactions. Over 32 million tax declarations and requests have already been transmitted electronically. FinanzOnline is available 24 hours a day, seven days a week and offers individual services for different users (citizens, economy, municipalities and party representatives).
The electronic transmission of tax declarations, including among others a preliminary calculation of the tax or credit note, represents one of the main functionalities of FinanzOnline. The user can alter his personal data at any time. Furthermore, it is possible to make enquiries about the tax account and the tax document online. The actual situation of the tax declaration or the payslip transmitted by the employer can be retrieved at any time. For ease of use and a more comfortable data acquisition, the declaration can be saved as a draft by the user during the online processing and work can be resumed later. In order to keep an overview, the different requests and declaration transmitted via FinanzOnline to the financial administration can be retrieved in a separate function. |
If requested, official notifications can be transmitted electronically into the electronic post box of FinanzOnline.
While the conventional way—on paper—to transmit an official notification usually takes on average several weeks until the applicant receives the notification, the user of the virtual finance office receives his official notification within one week.
As a further service, FinanzOnline offers the possibility for electronic payment. Through collaboration with banks in Austria, funds can be transmitted to the financial administration via FinanzOnline. In addition, FinanzOnline allows professionals to inform their clients about tax contributions to be paid.
FinanzOnline is the largest e-government application in Austria and facilitates not only the communication between the taxpayer and the tax office, but also opens potential synergies in the financial administration.
Electronically transmitted data is recorded automatically in the internal workflow of the tax office without media format break, thus the manual collection of the data can be omitted. Due to the online verification, only correct tax declarations are recorded and mistakes can be eliminated from the beginning. Furthermore, the process takes less time.
FinanzOnline has received several awards for its services at national and international competitions, including prizes at the “National Award Multimedia and eBusiness 2004,” the “Speyer Quality Award 2005” as well as the “European Public Sector Award 2007.”
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FinanzOnline Participants (as of 30.09.2008)
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FinanzOnline Participants (as of 30.09.2008) The graph “FinanzOnline participants” shows how many citizens, businesses, chartered accountants, solicitors, lawyers and municipalities participate at FinanzOnline since 2003 until 30.9.2008.