Austria will reduce its reduced VAT rate from 10% to 5% on selected goods effective July 1, 2026, according to an announcement from the Federal Chancellery. The measure applies to a defined basket of goods and forms part of the government's broader strategy to combat inflation.

The rate reduction is part of a comprehensive economic package aimed at bringing Austria's inflation rate down to 2%, which would represent a halving of current levels. Chancellor Christian Stocker described the VAT cut as support for consumers facing higher daily shopping costs, stating the measure will be implemented "with counter-financing that will include, among other things, a fee for packages from third countries such as China."

Broader Economic Measures

The VAT reduction accompanies other anti-inflation initiatives including the "Austria tariff" from state-owned energy company Verbund, offering electricity at under 10 cents per kilowatt-hour. The government also plans to introduce an industrial electricity price of 5 cents per kilowatt-hour from January 1, 2027, supported by industrial electricity security measures running from 2026 to 2029.

Austria has exited its recessionary phase, with economic growth projections improving from -0.3% to approximately +0.5% for 2025. The government targets at least 1% growth for 2026 through these stimulus measures.

Context

The reduced VAT rate cut represents Austria's latest effort to address persistent inflation that remains high by European standards. The measure's counter-financing through third-country package fees also reflects broader European concerns about unfair competition from low-cost imports, particularly from China, while supporting domestic retail businesses.