By abolishing the cold progression from January 1, 2023, Austrians should save some 18 billion euros by 2026. Treasury Secretary Magnus Brunner (ÖVP) describes himself as “no friend to superlatives”, but the law is historic. An allowance of 1.8 billion euros is expected next year, two-thirds of which will be returned directly and automatically to the taxpayer. This should be the second step in the fight against inflation.
The first effects of high inflation will be slowed down in the summer with emergency aid, but the situation can only be solved with structural measures, Brunner emphasized at a press conference on Thursday.
The abolition of cold progression has been talked about for decades, with the new law “abolishing it 100 percent,” as Brunner repeatedly emphasized. The related law will be examined on Friday.
Two-thirds of the deduction must be returned directly and automatically to the taxpayer in the future. The other third, namely around 600 million euros in 2023, is intended to relieve the burden on workers and retirees, in particular. “It would be more convenient for the finance minister not to abolish cold progression. But there is no comfort in the current situation,” Brunner said.
The economic research institutes Wifo and IHS have performed the calculations in advance. Inflation and income distribution were predicted. Scenarios have been compared in which the full amount, nothing at all or two-thirds were immediately repaid.
IHS: inflation remains high for years
The higher the inflation, the greater the exemption from the new law, said IHS director Klaus Neusser. An inflation of almost eight percent is currently assumed and a possible cessation of the gas supply has not yet been introduced, according to Wifo director Gabriel Felbermayr. Inflation will remain high in the coming years and the effects of abolishing cold progression will be even greater.
It can be assumed to a small extent that the law will have an inflation-increasing effect in the short term. However, that’s a “price worth paying,” says Felbermayr. He stressed that the “middle of the population” would benefit most from the abolition of cold progression.
Source: Krone
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