Fairer taxation for citizens strengthens purchasing power
Vienna (OTS) – The abolition of cold progression is the heart of the federal government’s relief measures and noticeably strengthens purchasing power. Cold progression is a phenomenon that burdens taxpayers unnoticed. It occurs when income increases with inflation, but the tariff bracket limits and deduction amounts in wage and income tax remain static. This means that citizens have to pay taxes on a higher proportion of their income and their income loses purchasing power.
An example: An employee with a gross monthly income of around 2,500 euros will receive a salary increase of around 9% in 2024 to compensate for inflation. By abolishing the cold progression, the employee’s burden is reduced by around 550 euros, which also increases the net income by around 9%, while without the abolition of the cold progression the net wage would only increase by around 7%.
“By abolishing cold progression, we are sending a clear signal for more fairness in the tax system. This step relieves the burden on citizens in the long term, namely every year. It is important to us that people concretely feel how their disposable income is improving, especially in times of rising living costs. I am glad that we succeeded in doing this in 2023 and the wage increases will also be fully achieved in 2024,” said Finance Minister Magnus Brunner.
A year without cold progression
With the abolition of cold progression, the creeping tax increase has ended. In the first year without cold progression, 2023, people saved more than 1.85 billion euros. Next year, taxpayers will save a further 3.65 billion euros.
The effect of the abolition of cold progression always becomes apparent from January 1st of the respective year, as tariff level limits and deductions are valorized at this point.
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