The government plans to reduce corporate income tax by 1% next year, as announced by Minister of Finance Gilles Roth in his March budget speech, aligning with the CSV-DP coalition agreement.

Despite positive state finance developments in the first half of the year, opposition parties are critical of this proposal.

The Christian Social People's Party (CSV) and the Democratic Party (DP) support the tax reduction regardless of state financial conditions. The 1% rate cut is projected to reduce state revenue by €38 million annually. However, Minister Roth argues that the reduction could ultimately increase revenue, explaining that lower taxes do not necessarily equate to less income.

Franz Fayot of the Luxembourg Socialist Workers' Party (LSAP) is sceptical, dismissing the "trickle-down" effect as a myth. He noted that increased growth has associated costs and externalities. Green Party MP Sam Tanson also advised caution, emphasising the need to maintain revenue in light of ongoing crises.

Pirate Party MP Sven Clement underscored the importance of competitiveness but stressed the need for equitable tax payment. He pointed out that small companies pay the full rate, while large companies can afford tax optimisations. Clement advocates for aligning actual tax payments with the stipulated rates.

Currently, the corporate income tax rate in Luxembourg is 15% for companies with taxable income under €175,000 and 17% for those over €200,000. Additionally, there is a municipal business tax, which varies by municipality: 6.32% in Luxembourg City, 7.62% in Esch-sur-Alzette, and 8.25% in Wiltz, for example. Since 2019, the overall tax rate for companies has been around 25%, down from 37.5% in 2001.