Austria cuts VAT on basic food items to below 5%

Government targets inflation with tax and energy price measures

The government of Austria has decided to lower Value Added Tax on basic food products and several other food items, according to DPA, cited by Agerpres. The decision was announced on Wednesday following a meeting of the ruling coalition.

Chancellor Christian Stocker said that, starting in July, the VAT rate will be reduced to below 5%. The exact list of products eligible for the lower rate is still being finalized.

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The move comes as Austria faces inflation levels roughly twice the EU average, making price control one of the government’s main objectives for 2026.

The VAT cut will be financed through a new tax on parcels from certain countries, particularly China. The government also plans to strengthen competition in the food retail sector.

“There is clear room to improve competition in food retail,” said Beate Meinl-Reisinger, Austria’s foreign minister and leader of the liberal Neos party, noting that the powers of the Federal Competition Authority will be expanded.

At the same time, electricity prices for households are expected to fall by about one third, generating annual savings of up to €200 per consumer, Stocker said. A new industrial strategy will introduce a capped electricity price of €0.05 per kilowatt-hour for industrial users starting in 2027, providing additional support for domestic industry.

The governing coalition of the conservative ÖVP, the Social Democrats SPÖ and Neos has been in power for ten months but continues to lose ground in opinion polls. The far-right Freedom Party (FPÖ) currently leads with nearly 40% support. Austria’s next general election is scheduled for 2029.

Photo: Eitan Rudinsky (pexels.com)