Luxembourg's Court of Auditors criticised the 2025 state budget in a report published on Tuesday, highlighting a "lack of strategy" and questioning the government's reliance on trickle-down economics.

On Tuesday, the Court of Auditors published its assessment of the proposed state budget for 2025. In its report, the institution expresses several concerns, particularly in relation to Luxembourg's public debt and what it refers to as a "lack of a long-term strategy" to rebalance state finances.

The Court of Auditors' report also makes several recommendations, including calling on the government to present a "proactive strategy" aimed at boosting the resilience of public finances and restricting future debts to "future oriented investments" related to the digital and environmental transitions. The institution believes that this is particularly important in light of current geopolitical tensions and the challenges presented by climate change and other crises. The Court of Auditors stresses that public debt has trebled since the 2008 financial crisis and criticised the draft budget presented by Minister of Finance Gilles Roth for lacking any such strategy. The Court finds this all the more concerning seeing as Luxembourg's "small and open" economy is particularly susceptible to external factors.

The Court of Auditors also commented on the government's so-called "relief measures," which includes tax breaks for businesses. The government argues that these measures are meant to boost competitiveness of Luxembourg-based companies, which, in turn, is expected to compensate for the loss in state income. The Court of Auditors notes that the government remains vague on the expected results, criticising that while the impact on state income is "abundantly clear", the supposed positive effect of the tax relief measures remains unclear.

Additionally, the Court of Auditors questions the excise duties increase for tobacco products, pointing out that the 5.5% increase will merely increase income while failing to lower demand. According to the Court of Auditors, the "health and social costs" of tobacco consumption must also be considered. The institution stressed that the income generated by the sale of tobacco products as well as fossil fuels is "not sustainable in the long-term." In this context, the Court of Auditors refers, among other things, to the goal of the European Commission to support a "generation without tobacco" by 2040, which aims to reduce the rate of smokers among the general population to below 5%. The Court of Auditors argues that by adopting a more proactive approach based on diversifying its tax resources, Luxembourg would not only be able to assure the country's long-term financial stability, but also effectively tackle environmental and public health challenges.