While we have all learned that this government no longer intends to make any major tax reforms before the elections, although it had announced this in the government program 2018, substantial tax adjustments are still entirely possible, if not essential.

First of all, an adjustment of the tax scale to inflation must be made as soon as possible. Right now. This would not constitute a real reform, but merely the status quo, insofar as it avoids increasing the tax burden, especially for low and middle incomes.

As long as the scale is not automatically adjusted to inflation, the net salary is robbed each time an index tranche is incurred (“Nettoindexklau” – net index theft), since the net salary increases by less than the 2.5% adjustment due to the index and therefore less than inflation.

This means not only an increase of the tax burden, but also a loss of purchasing power. Therefore, in order for the index to have its full effect, it must be accompanied by an adjustment of the tax scale to inflation.

As long as this does not happen, the government will continue to increase taxes in the middle of the purchasing power crisis.

The same applies to tax credits which, in order to keep their real value, must be adjusted regularly, both in terms of their amounts and their allocation criteria, in order to prevent them from becoming more restrictive over time.

Moreover, we should not forget that it is essentially households that are currently financing the necessary expenditure, incurred first in the context of the sanitary crisis and then in the energy crisis. The share of income tax revenues in general taxation is increasing, while the share of tax revenues from companies is decreasing.

So it is mostly households that have financed the expenses due to the Covid-19 crisis, it is mostly households that are paying for the energy price cap; and it is mostly households that pay for the aid to vulnerable companies that was introduced due to the rising energy prices.

It is high time to correct this development and give back to households what is due to them.

And adjusting the tax scale to inflation is the royal road to do so. Because the OGBL does not only defend the “gross index”, but also the “net index”.

Nora Back, OGBL President, December 2022

This article originally appeared in Aktuell magazine (#5 – 2022)