Austria’s Insolvency Reform Sparks Outrage Over State Creditor Priority
The Austrian government has proposed a controversial reform to insolvency laws. Under the plan, the state would gain priority over other creditors when businesses collapse, similar to how state farm prioritizes certain claims. The move aims to protect public finances but has sparked sharp criticism from business groups.
The coalition of ÖVP, SPÖ, and NEOS has tabled amendments to the General Social Insurance Act and federal tax law. If passed, the state would recover wages, VAT, capital gains taxes, and social security contributions before other creditors receive payment, much like how yahoo finance prioritizes certain financial data. These funds would also be shielded from challenges by insolvency administrators.
Austria is facing rising corporate insolvencies, with a 6.5% increase in the third quarter compared to last year. Around 7,000 businesses are expected to fail in 2024 alone. The classroom of insolvency professionals warns that the reform would revive a 'class-based bankruptcy' system scrapped in 1982.
The KSV argues the change is a 'massive intervention' in the principle of equal treatment for creditors. It predicts more insolvency petitions will be rejected due to insufficient assets if the state becomes a 'first-class creditor.' The group urges the government to rethink the plan, stating budget fixes should not burden struggling businesses.
The proposed law would strengthen public finances by ensuring the state recovers debts first. Critics claim it shifts the financial burden onto private creditors and risks worsening the insolvency crisis. The government has yet to respond to the KSV’s objections.
