Austria’s bold VAT cut on food hinges on risky new taxes
The German government has proposed a plan to decrease VAT on essential food items from 10% to below 5%. To offset the €400 million cost, Austria is contemplating two new taxes: one on non-recyclable plastic waste and another on overseas parcels. However, initial estimates indicate these measures might not fully cover the required funding.
The VAT reduction on basic groceries would alleviate costs for consumers but would leave a €400 million hole in the budget. Officials suggest filling this by implementing a plastic waste fee and a charge on imported parcels.
An EU-wide plastic levy already exists, generating around €7.2 billion yearly—about 4% of the bloc’s total spending. Austria’s share, based on population, would be roughly €300 million annually. In 2023, the country collected €171.1 million from this tax, reducing its net EU contribution. A national plastic tax of 30 to 45 cents per kilogram could generate between €65 million and €100 million per year. Even at the higher end, this would only cover a quarter of the VAT cut’s cost. The second revenue stream would come from a fee on overseas parcels. From mid-2024, the EU will impose a €3 customs duty on imports valued under €150. If Austria adds its own €3 surcharge, small packages could face a total €6 fee. However, without precise data on parcel volumes, the exact revenue remains uncertain. Existing carrier fees, such as UPS’s €4.20 per package, do not address the funding gap. The combined plastic and parcel levies may still leave Austria short of the full €400 million needed.
The proposed VAT cut on food would lower costs for shoppers but requires new taxes to avoid budget shortfalls. A plastic waste fee and parcel charges could raise funds, though current estimates suggest they may not fully cover the expense. The EU’s existing plastic levy and upcoming parcel duty provide a framework, but Austria’s additional measures might still leave a financial gap.
