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Why do we pay taxes?

What Dr. Dr. Money says
fixkosten
If you earn more than 13.308 euros per year (2025), you have to pay a part of your income to the tax authorities. The other part belongs to you. Taxes are also levied on everything we buy.
Tax revenue funds the state
The basic concept is this: Everyone has to earn what they need for their livelihood. And a share of every income is paid into the public coffers. This money – the state’s tax revenue – is used to pay for things that benefit the public as a whole. Income tax is only one form of taxation. We regularly pay other taxes too, most notably value-added tax (VAT). The VAT rate in Austria is 20 per cent. VAT is added to the price of everything you buy and collected by the state. Some products, such as books, are subject to a reduced VAT rate of ten per cent.
Example
Say you buy a pair of trousers for € 60: 20 per cent of € 60 is € 12, which is the value-added tax that is collected by the tax authority.

What happens to the tax money?

Tax revenue is used to pay for government administration and defence, to build, maintain and manage roads and hospitals, to pay out pensions and other benefits, and to fund schools and universities. Tax money is also used to pay back public debt. Statistics Austria, the national authority in charge of statistics, publishes annual reports on how the government has spent the tax revenue each year: Government spending by sectors.

Who determines how the money is spent?

How the tax revenue is spent is determined by the government ministers responsible for budgeting. They prepare a budget for each year which has to be approved by parliament. Then the government tries not to spend more than what is planned in the budget. Individual taxpayers cannot directly determine what will be done with their tax money. Paying taxes does not give you a right to a specific benefit in return. This is one reason why many people are annoyed by taxes: Not everyone agrees with the decisions made by the government. However, you cannot choose whether to pay or not. Paying taxes is a legal duty.

Taxes since antiquity

Taxes are not a modern invention. They have been around forever in one form or another. They have been variously called “tribute”, “tolls” or “tithes”, a term that even appears in the Bible. And throughout history, political leaders have been very inventive in creating taxes on this and that. When money was tight in ancient Rome, Emperor Vespasian (born 9 AD – died 79 AD) introduced a tax on the use of public toilets. In justifying this new levy, he famously remarked “Pecunia non olet” (“Money does not smell”), a phrase that has become proverbial.

How to pay less tax?

You cannot simply refuse to pay taxes, or pay less than you have to – that is illegal. Tax evasion is not a trivial offence and is subject to strict penalties. However, tax on income can be reduced legally by deducting expenses. You can find information on how this works in the tax guide published by the Ministry of Finance. It pays to make the effort, even if your only income is from a summer job.
Why do we pay taxes?

What Dr. Dr. Money says

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