Food prices

Babler pushes ahead against the government line

The SPÖ leader also wants a tax cut.(Bild: Imre Antal)

The debate on food prices could lead to even greater upheaval in the government. Contrary to the previous government line, Vice-Chancellor Andreas Babler is now forging ahead and wants to examine the proposal by WIFO head Gabriel Felbermayr to halve VAT on food.

Finance Minister Markus Marterbauer (SPÖ) as well as the ÖVP and NEOS are against interventions in VAT for cost reasons. "Fighting inflation is one of the most important goals of this government. At the same time, we must continue to implement the budget tightly in order to balance the state budget," says Marterbauer's office. A reduction in VAT is therefore "unaffordable".

Economic researcher as a lone voice
Specifically, Felbermayr proposes reducing the reduced tax rate from ten to five percent. He refers to other EU countries with low tax rates on food, such as Italy with four percent or Germany with seven percent. In return, the standard tax rate is to be increased by one and a half percentage points.

Marterbauer's office counters this: "If VAT were to be halved for some products and increased for others in return, this would have no positive effect on inflation." The measures currently being taken by the government, such as the EU-wide fight against the Austrian surcharge or a ban on shrinkflation, must now be implemented "swiftly".

Finance Minister Marterbauer must look at the budget.(Bild: Eva Manhart)

ÖVP State Secretary Barbara Eibinger-Miedl, who still wanted to discuss a VAT reduction in the summer, has now also backed down. This was discussed at the government meeting at the beginning of September. Fiscal Council head Christoph Badelt agrees with the government: "It would be insanely expensive and the effect questionable. We simply can't afford it."

Babler open to WIFO proposal
However, Vice-Chancellor Andreas Babler now wants to reshuffle the cards. The SPÖ leader is now taking the reins into his own hands and wants to put the WIFO proposal to halve VAT on the federal government's agenda for negotiation. An exchange with Finance Minister Marterbauer has already taken place and there is agreement that models will be examined: "Which foods are affected and to what extent VAT should be reduced will be a matter for negotiation. It is clear that this will not happen without counter-financing. In view of the current prices, however, it is important that there is more movement now."

Babler goes on to emphasize that the permanent reduction of inflation to below two percent is not only a goal, but an obligation. If the measures are not enough, more will be delivered and there will be no fear of discussing market interventions. Many things are conceivable. "Whether with price commissions like our Italian neighbors or a profit cap for producers," the Vice Chancellor continued.