Bolkestein has Austrian taxes under microscope

Date: 10/06/04

FRITS Bolkestein, the internal market commissioner, is examining claims that the Austrian income tax system acts unfairly against workers with foreign earnings.

Under the Austrian rules, citizens with domestic earnings pay an average tax rate that is calculated and adjusted downwards only after personal allowances - based on data such as their marital status - have been taken into account.

However, under the Austrian code, this right is curtailed for workers with foreign earnings.

Consequently, they may be taxed at a far higher rate.

This means Austrians who work part of their time abroad, or expatriates working in the country, could opt to stay at home.

Bolkestein, in charge of applying European rules on free movement of workers, said a "first examination" of the Austrian tax system, which was updated in 1993, "led to doubts as regards its compatibility with EU law".

He said the EU executive is contacting Vienna and will "if necessary, take further steps to ensure the compliance".

Under EU tax rules, neither the Commission nor the Council of Ministers has the right to tell member states what level of tax they can charge citizens.

However, Article 39 of the EC Treaty states that workers should be free to move around the EU and that they should not face discrimination - for example, on tax rates when they exercise this right.

It says freedom of movement "shall entail the abolition of any discrimination based on nationality between workers of the member states as regards employment, remuneration and other conditions of employment".

Frits Bolkestein, European Commissioner for the Internal Market, is investigating allegations that Austria's income tax system acts unfairly against workers with foreign earnings.