Coordination between the three layers of government in Austria - federal, state, and municipal - is the essential feature of Austrian fiscal policy making. All three levels have elected government institutions, independent decision making powers, and budgetary autonomy. A Fiscal Equalization Law, renewed every four years, provides the framework for the distribution of tax sharing, intragovernmental transfers, and cost bearing among the three government levels. Furthermore, as a member of the Euro-Zone, Austria is subject to the constraints of the European Monetary Union's Stability and Growth Pact, which it has incorporated into its own Austrian Stability Pact. For a number of years, Austrian authorities have been urged to adopt a medium-term budget framework to provide clearer objectives in order to increase efficiency and transparency. According to the International Monetary Fund's 2007 Article IV Consultation, the Austrian authorities have now made progress toward achieving and implementing a medium-term budget framework. However, there is insufficient publicly available information addressing Austria's overall compliance with the IMF's Code of Good Practices for Fiscal Transparency.

General Overview

The Austrian government is organized in three layers: the federation (der Bund), the states (die Länder), and the municipalities (die Gemeinden). The three different levels coordinate their finances by using a revenue-sharing agreement mechanism (Finanzausgleich) which helps ensure that all subnational governments are properly financed as specified in the 1948 Fiscal Constitutional Law. The revenue-sharing agreement is set out for four years and is enacted as the federal Fiscal Equalization Law (Finanzausgleichgesetz, or FAG). According to the Federal Ministry of Finance's 2007 report, the FAG describes the roles and responsibilities of the Federation, the Länder and the municipalities. The FAG provides the guidelines for the distribution of tax sharing, intra-governmental transfers and cost bearing among the three government levels. The 2006 Organization for Economic Cooperation and Development (OECD) working paper on Reforming Federal Fiscal Relations in Austria observes that the provisions in the FAG are valid for a period of four years, with the most recent update enacted in January 2005. The same OECD working paper also concludes that the equalization system is complex due to the redistribution system, which has made the process less transparent. Furthermore, according to OECD's Economic Survey of Austria 2005, "transparency was hampered by the fact that some accounting rules are not fully harmonized between the different government levels".

The International Monetary Fund (IMF), in its 2007 Article IV Consultation, recommends that the Austrian government adopt a medium-term budgetary framework that provides expenditure targets in line with the fiscal objectives in order to improve efficiency and transparency and promote budget discipline. According to the OECD's 2007 presentation on Budgeting in Austria, as well as the IMF's 2007 Article IV consultation, the country has undertaken some fiscal reforms, and there are plans to introduce more. These include a medium-term expenditure framework. The reforms would make "each minister his own finance minister," and would separate the setting of expenditure ceilings from the annual budget. The 2006 OECD working paper also recommends the following: a revision of the budget laws to simplify the structures of budget appropriations approved by parliament; a transition from cash based budgeting to accrual based, as the latter ensures more transparency; a better harmonization of the accounting rules at all government levels; and a better mechanism to evaluate the costs and benefits of policy programs as well as the provision of improved information in all government layers.

The 2007 OECD report notes that the Austrian Stability Pact, which sets the deficit and surplus targets for all levels of the government, is in line with the European Monetary Union's Stability and Growth Pact. The IMF's 2005 Article IV Consultation states that subnational governments, per the Austrian Stability Pact for 2005-08, agreed to raise their aggregate fiscal surplus from 0.5% of GDP in 2005 to 0.75% of GDP by 2008. The IMF's 2007 report notes that corporate income taxes and sales taxes showed a significant increase. This has lead the authorities to revise down the 2006 projected fiscal deficit from 1.8% of GDP to 1.2% of GDP. 2006 also showed a decrease in the public debt ratio. However, the change was not substantial enough to bring the ratio below the Maastricht reference value of 60 percent. With the unexpected decrease in fiscal deficit, the government has revised its date for balancing the budget to 2009-2010.

In 2003, Alt and Lassen published "Fiscal Transparency in OECD Countries," in which they analyzed 19 OECD countries on the subject of transparency, hoping to determine whether increased fiscal transparency is closely related to low public debt. Using a 12-point scoring system, Austria scored 4 out of 12 on the fiscal transparency index compared to neighboring Italy at 3 and Germany and Switzerland each scoring 2.

The Principles

Clarity of roles and responsibilities.

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Publicly available information does not directly address Austria's compliance with this principle. However, the IMF's 2005 Article IV Consultation describes the different bodies in government with their corresponding authority. The three layers in the Austrian government are federal, state, and municipal. Public expenditures are agreed upon through intergovernmental coordination and dispute-settling mechanisms. The constitution spells out the taxing powers giving authority to the federal government to collect most tax revenues, while spreading spending powers across all three levels. On the other hand, subnational governments are given the responsibility to administer programs but the decision-making process is centralized at the federal level.

The three levels of government coordinate their finances by using a revenue-sharing agreement mechanism (Finanzausgleich) which helps ensure that all subnational governments are properly financed. This agreement becomes federal law as the Fiscal Equalization Law (FAG). According to the Federal Ministry of Finance, the FAG describes the roles and responsibilities of the Federation, the Länder, and the municipalities. The FAG provides the guidelines for the distribution of tax sharing, intra-governmental transfers and cost bearing among the three government levels. The OECD's working paper on Reforming Federal Fiscal Relations in Austria observes that the provisions in the FAG are valid for a period of four years with the most recent update passed in January 2005.

Revenue distributions are conducted based on the size of the population with concessions made for larger municipalities that have a per capita revenue that is under the national level. The Federal Ministry of Finance notes that "approximately 95% of all revenue is levied by federal revenue offices; municipalities levy more than 4% and Länder less than 1% of the total revenue" (2006, p. 2). According to the Federal Ministry of Finance's website, the Directorate General for Budget and Public Finances is the body responsible for planning and executing the federal budget. The Directorate is also responsible for the financial relations among the Federal State, its political subdivisions and the European Union.

Open budget processes

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Public information related to Austria's compliance with this principle is limited. However, in his 2007 OECD presentation; Bergvall observes that - constitutionally - parliament has an abundance of power in the budget process. This includes the right to amend the budget or prepare a new one without input from the government. However, the legislator's actual role is very limited. This is due in part to the political environment and the parliament's institutional structure in deliberating the budget. Other obstacles have to do with the fact that there is insufficient time to deliberate thoroughly on the budget as it is frequently presented to parliament only two months in advance. This lack of in depth analysis contributes to a lack of incentives to promote fiscal discipline. According to the IMF's 2007 Article IV Consultation, the Austrian authorities have now made progress towards achieving and implementing a medium-term budgeting framework, which will allow the introduction of fiscal policies with a medium-term focus.

Public availability of information.

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According to the IMF's Special Data Dissemination Standard (SDDS) website, Statistics Austria disseminates data budgetary components such as revenue, expenditure, surplus and deficit from all three government levels. Data related to the budget is disseminated three months after the reference year. A specific release date is given in advance on the Statistics Austria website and budget information is available to the public. Austria is a subscriber to the IMF's SDDS, and its metadata is available on the Fund's electronic Dissemination Standards Bulletin Board. However the publicly available information does not directly address Austria's compliance with this principle.

Independent assurances of integrity.

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Public information related to Austria's compliance with this principle is limited. However according to Statistics Austria's website, the statistics bureau disseminates data on general government operations as a service to the public. The legal base is the Federal Statistics Act (Bundesstatistikgesetz 2000) and the Data Protection Act (Datenschutzgesetz 2000). The Federal Statistics Act includes a general obligation to publish statistics.