Where do Luxembourg's parties stand on tax reform?

This debate is long overdue. After the government's announced tax reform was postponed due to the pandemic, MPs from the Parliamentary Budget and Finance Committee met over the past months with representatives from the Luxembourg Inland Revenue (ACD), the Registration Duties, Estate and VAT Authority (AED), the OECD, the Economic and Social Council (CES), as well as a large number of stakeholders, in order to discuss the modernisation and challenges of the Luxembourg tax system. According to co-rapporteur André Bauler from the Democratic Party (DP), the topic was "thoroughly discussed".

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DP: No room for a big push in tax policy

On behalf of his party, the MP once again insisted that public finances currently not allow for a major tax reform. Bauler also listed the changes implemented by the government in recent years to achieve greater social justice. The DP is opposed to the introduction of an inheritance tax on direct descendants, to an increase in the top tax rate for individuals, and to tax increases in times of crisis in general, according to Bauler. A wealth tax for individuals is also a taboo for the liberal party. The DP's stance on concrete tax cuts, on the other hand, is less clear. The MP argued that sound public finances should be a prerequisite for adjustments, which would include the adjustment of the tax table to inflation.

However, the DP would be open to discussion on reliefs for single parents and on short-term changes to the accelerated depreciation on rental properties. In the medium term, the DP's objective remains the individualisation of taxation.

CSV: Tax Justice Now!

MP Gilles Roth, co-rapporteur for the Christian Social People's Party (CSV), stressed that "work must pay off". He argued that one way of achieving this is to raising the top tax rate. At the same time, the CSV thinks that the minimum wage for unskilled workers should be completely tax-free.

In the area of housing, not only should the limits on interest payments be doubled and the tax credit on notarial acts increased, but the reduced rate on capital gains after a sale should only come into play after five years, according to the CSV. Currently, it is applied to sales that occur after only two years. The opposition party is also in favour of introducing a cap on accelerated depreciation. On the other hand, it is opposed to the reintroduction of a wealth tax for individuals. The CSV also categorically rejects its former Party President Frank Engel's proposal of an inheritance tax in the direct line.

LSAP: Tax relief for families with children!

An adjustment of the tax table to the index would mainly help those who already have a lot, says MP Dan Kersch from the Luxembourg Socialist Workers' Party (LSAP). Nevertheless, the LSAP agrees that work needs to be done regarding the progressivity of the tax table and that the top tax rate needs to be raised

Families with children should receive greater support, and this by introducing a child tax credit and a tax credit for single parents, the LSAP proposes. In addition, entry-level workers should be eligible for a tax credit for five years, provided they meet certain conditions, Kersch said.

The LSAP also demands the reintroduction of the wealth tax. However, a high basic allowance should remain tax-free.

Another issue addressed by the LSAP was the time-limited introduction of a tax for companies that increased their profits during the health crisis.

Green Party: Tax rate adjustment possible on a selective basis

MP François Benoy from the Green Party (Déi Gréng) notes that adjusting the tax table to inflation is not an option because it would not be financially feasible. However, the Green Party does not fundamentally reject a selective adjustment. In this case, the top tax rate would have to be adjusted.

The Green Party also demands greater support for single parents through a tax credit.

adr: 'We are against all taxes'

The Alternative Democratic Reform Party (adr) believes that the state "interferes in too many things that are not its business". Work and performance are taxed too much in this country, says MP Roy Reding, particularly among the self-employed.

The adr demands that the minimum wage should be tax-free. The party also demands an indexation of the tax table and the reclassification of single parents into tax class 2. Inheritance tax should be abolished up to the fourth degree. "We are against all taxes," Reding said during his speech.

Left Party: A progressive property tax is needed

According to MP Nathalie Oberweis from the Left Party (Déi Lénk), the wealth tax should be reintroduced for individuals. In addition, income from work and capital should be taxed equally, and the top and table tax rates should be increased.

In the area of housing, tax measures are currently often "counterproductive". For this reason, the Left Party calls for real estate to be made unattractive as an object of investment and speculation. This requires the introduction of a progressive property tax, according to the opposition party.

Oberweis also pointed out that environmental taxes in Luxembourg are "very low" compared to other countries. However, the MP cautioned that the social impact and incentive effect should be checked when introducing such taxes. The polluter-pays principle should always apply, according to the Left Party.

Pirate Party: There should only be one tax class

The current tax system is not fair for a majority of people, according to MP Sven Clement from the Pirate Party. The Pirate Party calls for a single tax class so that everyone is treated equally. Clement also argued for a simplified tax legislation, where there are no exceptions.

The Pirate Party is in favour of a tax exemption for the minimum wage. Small and medium-sized enterprises, such as start-ups, should be able to benefit from tax advantages, but not large companies, as is currently the case, according to the Pirate Party.

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