ÖVP in a quandary

Bank levy 2.0: old tax, new fuel for the fire

According to the FPÖ, taxpayers helped out the banks during the banking crisis and now the time has come for the banks to contribute to the common good.

(Bild: Markus Wenzel)

A possible bank levy could still tip the current negotiations for a blue-black coalition. The ÖVP, in particular, is in danger of losing face if such a tax is introduced - after all, it has recently strictly rejected such a tax vis-à-vis the SPÖ. However, the idea of such a levy is not entirely new.

The bank levy, also known as the bank tax, was introduced in Austria in 2010/11 in response to the financial crisis and bank bailouts in order to generate additional revenue for the state budget. The annual reference value was initially set at 500 million euros, later at 640 million euros.

Banks should make a contribution
The then Federal Chancellor Werner Faymann (SPÖ) and Vice-Chancellor Josef Pröll (ÖVP) agreed on the tax, which was officially referred to as a stability levy. The aim was to involve banks in the costs of the rescue packages, promote financial market stability and encourage economically sensible loans.

This time, forming a government is not as amicable as it was a few years ago. The FPÖ is showing the ÖVP massive limits.

(Bild: AFP/Alex HALADA)

The tax was based on IMF proposals and was applied to the Austrian balance sheet total of banks (over 1 billion euros), while savings deposits, equity and hedging transactions remained untaxed.

Should raise several billion
After lengthy negotiations, the levy was agreed in October 2010 as part of a tax and savings package. From 2011, speculative derivative transactions, for example, were taxed at 0.015 percent of the nominal value. By 2017, the levy was expected to raise at least 4.3 billion euros, including 640 million euros in 2014.

From 2017, the levy was reduced to 100 million euros per year, supplemented by a one-off advance payment of 700 million euros from the banks. Some of the revenue went to the federal, state and local governments, but was later adjusted in favor of the federal government.

Will the blue-black coalition fail?
The bank levy has once again become a bone of contention in politics. The reason for this is the ailing state finances, which urgently need to be restructured in the upcoming budget. The original SPÖ demand is now being pushed by the FPÖ against the ÖVP, putting a possible government pact to the test. 

It therefore remains to be seen whether a compromise can be found or whether the issue of the bank levy will become a stumbling block in the formation of a government.