Austria is moving to ease the pressure of rising food prices, as lawmakers approve a tax cut on essential groceries aimed at helping households cope with the cost of living. On Tuesday, the finance committee gave the green light to reduce value-added tax (VAT) on basic food items, with the change set to begin on July 1, 2026.
Under the plan, supported by the ruling ÖVP, SPÖ, and NEOS parties, VAT on key staples will drop from 10 percent to 4.9 percent. The reduction will apply to everyday essentials such as milk, yogurt, butter, eggs, bread, fruits, vegetables, rice, flour, pasta, and salt. Meals sold in restaurants and similar services will not be included.
Finance Minister Markus Marterbauer described the measure as a targeted effort to support households during a time of continued price increases, especially in the food sector. Government estimates suggest that families could save close to €100 per year on average, offering some relief for tight budgets.
However, the tax cut will also reduce state revenue. Officials project a loss of €135 million in 2026, rising to about €400 million annually from 2027. By the end of the decade, total losses could reach €1.7 billion. To help balance this, the government plans to introduce a €2 fee on parcel deliveries.
The proposal has sparked debate. Critics, including members of the Greens and the FPÖ, argue that the benefits may not be evenly shared. Higher-income households, they say, could gain more simply because they spend more. There are also doubts about whether supermarkets will fully pass the savings on to consumers. Some lawmakers have warned of practical challenges, such as updating cash register systems to handle the new tax rate.
Supporters counter that any step to slow inflation is valuable. For many families, even small savings on daily essentials can make a noticeable difference.
