Intergovernmental budget frameworks in Austria

Austria’s federal fiscal constitution is heavily centralised. A consensus-driven political system serves as a counterweight. While the federal parliament has overwhelming taxing authority and decides on tax sharing, cost bearing rules and transfers, legislation is usually drafted on a consensual basis across government levels and amended every four to six years. Within this framework each Land (regional government) or local government is responsible for its own budget. To coordinate budgetary policies the Internal Austrian Stability Pact sets well-defined budgetary goals for each government and ensures compliance through potential sanctions. The intergovernmental framework does not provide tax autonomy for Länder governments, which are financed via federal tax-sharing and transfers. The lack of accountability towards taxpayers as well as a lack of fiscal transparency due to federal co-financing reduce efficiency, and the considerable political clout of the Länder leads to soft-budget constraints. Reforms towards more tax autonomy and efficiency are planned, but are difficult to adopt given that strong vested interests have to be overcome.