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Austria
Austria's economic freedom score is 71.2,
making its economy the 23rd freest in the 2009 Index. Its score remains
essentially unchanged from last year. Austria is ranked 11th out of 43
countries in the Europe region, and its overall score is well above the
regional average.
Austria has a strong tradition of respect for property
rights and clean government. As a member of the European Union, its tariff
is standardised at a low rate, and monetary stability is well established.
The government has moved to streamline complex and time-consuming
regulations. Foreign investment requirements are not particularly
stringent. Austria's well-developed financial market facilitates vibrant
entrepreneurial activity.
Austria's corporate tax rate is competitive, but
personal income is taxed heavily. Austria remains weakest in government
size, with government spending equal to almost 50 per cent of GDP. Further
budgetary tightening should complement tax cuts planned for 2010. Several
budget-trimming health-sector reforms are to be phased in gradually until
2012. On January 1, 2008, after overcoming some political hurdles, the
federal, state, and local governments implemented the first phase of a
fiscal coordination scheme with measures that reallocate expenditure
responsibilities and stress fiscal accountability at all levels.
Background
Austria joined the European Union in 1995, cementing
its ties to the West. Over the past decade, the government has
relinquished control of formerly nationalised oil, gas, steel, and
engineering companies and has deregulated telecommunications and
electricity. From 2000–2007, People’s Party Chancellor Wolfgang Schüssel
accelerated market reform and significantly limited government
intervention in the economy. Austria’s primary trading partners are
other EU member states, which account for more than 80 per cent of imports
and exports. The coalition government headed by Schüssel’s Social
Democratic successor, Alfred Gusenbauer, dissolved after just 18 months.
In the September 2008 parliamentary elections, far-right parties made
significant gains, but Social Democrat Werner Faymann was invited to form
another coalition government.
Business freedom 78.6%
The overall freedom to start, operate, and close a
business is relatively well protected under Austria's regulatory
environment. Starting a business takes an average of 28 days, compared to
the world average of 38 days. Obtaining a business license involves less
than the global average of 18 procedures, and closing a business is easy.
Trade freedom 85.8%
Austria's trade policy is the same as that of other
members of the European Union. The common EU weighted average tariff rate
was 2.1 per cent in 2005. Non-tariff barriers reflected in EU and Austrian
policy include agricultural and manufacturing subsidies, import
restrictions for some goods and services, market access restrictions in
some services sectors, non-transparent and restrictive regulations and
standards, and inconsistent customs administration across EU members. Ten
points were deducted from Austria's trade freedom score to account for
non-tariff barriers.
Fiscal freedom 49.9%
Austria has a very high income tax rate and a moderate
corporate tax rate. The top income tax rate is 50 per cent, and the top
corporate tax rate is 25 per cent. Other taxes include a value-added tax
(VAT) and a tax on insurance contracts. In the most recent year, overall
tax revenue as a percentage of GDP remained very high at 43.4 per cent.
Government size 27.1%
Total government expenditures, including consumption
and transfer payments, are very high. In 2004, government spending equaled
49.3 per cent of GDP. With a limited deficit, Austria's government
finances are in better shape than those of some other euro zone economies.
Monetary freedom 80.9%
Austria is a member of the euro zone. From 2005 to
2007, its weighted average annual rate of inflation was 2.1 per cent. As a
participant in the EU's Common Agricultural Policy, the government
subsidises agricultural production, distorting the prices of agricultural
products. It also subsidises rail transportation and operates some
state-owned firms, utilities, and services. Ten points were deducted from
Austria's monetary freedom score to account for policies that distort
domestic prices.
Investment freedom 70.0%
There is no discrimination against foreign investors,
but they are required to follow a number of regulations. For example, at
least one manager must meet residency and other legal qualifications.
Non-residents must appoint a representative in Austria. Foreign investment
is forbidden in arms, explosives, and industries in which the state has a
monopoly, the auditing and legal professions, transportation, and electric
power generation. Investment is subject to strict environmental
restrictions. There are no controls or requirements on current transfers,
access to foreign exchange, or repatriation of profits. Real estate
transactions are subject to approval by local authorities. Austria's
legal, regulatory, and accounting systems are transparent, but bureaucracy
can be cumbersome. Expropriation of private property is rare and may
proceed only on the basis of special legal authorisation. The
expropriation process is fully transparent, is non-discriminatory with
respect to foreign firms, and results in just compensation.
Financial freedom 70.0%
Austria's financial system is well developed, and
banks provide a wide range of credit and financial instruments. Domestic
as well as foreign investors enjoy access to Austrian credit and capital
markets without government restriction. Markets set interest rates, and
foreign banks operate freely. Financial regulations are transparent and
consistent with international norms. With its foreign exchange regime
fully liberalised, Austria does not have any controls or limitations on
cross-border transactions. The stock exchange, privatised in 1999 and
modest in size, has performed consistently better than those of other
industrialised countries in recent years. Additional capital is readily
available from elsewhere in Europe.
Property rights 90.0%
Private property is very secure. Contractual
agreements are enforced, and the protection of private property and
intellectual property is well established and effective. There is a
long-standing tradition of respect for the rule of law, and the judiciary
is independent.
Freedom from corruption 81.0%
Corruption is perceived as minimal. Austria ranks 15th
out of 179 countries in Transparency International's Corruption
Perceptions Index for 2007. Any person who bribes either an Austrian or
foreign government official is subject to criminal penalties.
Labour freedom 78.7%
Austria's flexible labor regulations enhance
employment and productivity growth. However, the non-salary cost of
employing a worker is high because the cost of fringe benefits per
employee still remains among the highest in the EU.
— Courtesy: The Heritage Foundation
Quick Facts
Population
8.3 million
GDP (PPP)
$298.5 billion
3.3% growth
1.9% 5-year compound
annual growth
$36049 per capita
Unemployment:
4.4%
Inflation (CPI)
2.2%
FDI Inflow
$248.4 million
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