FILE PHOTO - An Austrian flag is seen on the desk of a Member of the European Parliament during a debate at the European Parliament in Strasbourg, France, July 3, 2018. REUTERS/Vincent Kessler

VIENNA (Reuters) - Austria has rejected European Union criticism of its decision to cut benefits payments for some children living abroad, saying the policy just recognizes that there are lower living costs in other countries.

Slovakia and other eastern European states have complained about the cuts saying they discriminate against their nationals who work in Austria but keep their families back home.

The EU has sent Austria a “letter of formal notice” about the policy, which could be a first step towards legal action against Vienna. Brussels said it was unfair for some people in Austria to pay the same taxes but receive lower benefits.

Austria’s ruling coalition of conservatives and the far right started indexing the child benefit payments to living costs in January as part of a broader package of tax cuts and reductions in benefits for refugees and immigrants.

The government said it had written to the EU formally defending the policy. Conservative family minister Juliane Bogner-Strauss told ORF radio that other states has different living costs “so we have different situations”.

Austria borders eight countries, including the Czech Republic, Slovakia, Hungary and Slovenia, where wages are significantly lower.

Eastern Europeans make up a large part of its workforce in sectors including healthcare and construction but they often live and work away from their families and children.

In 2016, Austria transferred 273 million euros ($325 million) abroad to EU and European Economic Area countries in benefit payments for 132,000 children.

The European Commission criticized Germany in 2017 for a similar plan to cut child benefits, which was later abandoned.