Austrian government to raise flight tax, start income tax cuts next year

KREMS AN DER DONAU, Austria, Jan 30 (Reuters) - Austria’s new coalition government of conservatives and Greens will increase a tax on flights and start cutting income tax next year, putting off plans such as reducing the corporate tax rate.

“It will become more expensive to fly, above all on short-haul flights,” Vice Chancellor and Greens leader Werner Kogler told a news conference on Thursday at which the moves were outlined after a cabinet meeting in Krems an der Donau on the River Danube.

The government led by Sebastian Kurz’s conservatives, which took office three weeks ago, has made cutting taxes a priority while also planning a range of environmental measures. The most far-reaching have yet to be finalised and should start taking effect in two years’ time.

The flight tax, outlined in the coalition agreement this month, will change an existing tax on flights out of Austria, which ranges from 3.50 euros ($3.88) per passenger for short-haul journeys to 17.50 euros for long-haul flights, replacing it with a single levy of 12 euros.

This should bring in an extra 110 million euros a year, Climate Change Minister Leonore Gewessler said. It is one of six measures the government announced would take effect next year.

Others include overhauling car taxation to encourage the use of emissions-free vehicles such as electric cars, and reforming a truck toll to make more polluting vehicles pay more.

Those measures were dwarfed by the planned income tax cuts, reducing the first income-tax bracket to 20% from 25% from next year, a reduction worth 1.6 billion euros, Finance Minister Gernot Bluemel said.

Cuts to the second and third brackets, to 30% from 35% and 40% from 42%, will take effect from 2022, the government said in a statement. Kurz said in total those reductions would be worth 4 billion euros a year.

The government appeared to put off until later another fiscal project - cutting the corporate tax rate to 21% from 25%.

“We decided that we will provide tax relief step by step ... and of course within the budgetary constraints,” Bluemel said when asked when the corporate tax cut would happen. ($1 = 0.9014 euros) (Reporting by Francois Murphy, Editing by Timothy Heritage)