Finance Ministry Proposes VAT Changes to Meet 2026-2029 Budget Goals
The Federal Ministry of Finance has proposed potential savings measures across various sectors for the years 2026 to 2029, aiming to achieve budget goals that target lower inflation and a balanced budget. Despite recent higher inflation, the Finance Minister remains optimistic about reaching the two percent inflation target set by the Federal Chancellor next year.
WIFO-Chef Gabriel Felbermayr has suggested reducing the reduced VAT rate on food from 10 to 5 percent and increasing the standard rate to help with budget consolidation. The improved economy has contributed to maintaining the budget target, with the overall state making 1 billion euros more debt than budgeted. However, the current deficit projection for states and municipalities stands at 6.2 billion euros, despite Vienna's planned savings of 500 million euros.
Initially, the SPÖ Vienna estimated a budget deficit of up to 3.8 billion euros for Vienna, while the Federal Ministry of Finance estimated a deficit of 4.8 billion euros for all states and municipalities in April. State Secretary for Finance Barbara Eibinger-Miedl attributes the improved economic development and the federal government's strict implementation to maintaining the budget target.
The federal government maintains its 2025 budget target of a 4.5 percent deficit of the gross domestic product (GDP). The Finance Minister believes that the budget target can be met without new taxes, and the economy's positive development is playing in favor of the budget. However, the Finance Minister acknowledges the challenge of changing VAT rates on food due to budgetary constraints and supports other measures like combating the Austria surcharge. Despite a better-than-budgeted performance of 800 million euros by the federal government, the deficit of the states, municipalities, and social insurance is 1.8 billion euros higher.
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