The Luxembourg Inland Revenue (ACD) is undergoing one of the biggest transformations in its history. The government plans to invest over €226 million in a complete digital restructuring of the administration, according to a draft law now before the Chamber of Deputies.
The goal is a modern, digital, and more efficient tax administration that moves away from paper-based and partly outdated systems. "We are trying to become modern, accessible, and close to the citizens," said ACD Director Jean-Paul Olinger. He noted that the current infrastructure dates back to the 1970s and 1980s. "Even with AI and the new developments that are coming, we can no longer build upon it," he added.
The scale of the task is reflected in the figures. The ACD processes hundreds of thousands of tax files each year. In 2024, it issued 880,000 tax cards and processed 580,000 tax returns, managing total tax revenues of €16 billion.
Despite this, much of the work remains paper-based. Only a small fraction of private tax returns are completed digitally via MyGuichet. Olinger acknowledged that the majority of tax returns still arrive on paper, adding that the ACD would like to offer citizens an easy way to submit their returns digitally.
A completely new internal platform is now to be introduced, designed to simplify work not only for citizens and businesses but also for ACD staff. "We would also like an interface that allows the citizen and the tax official to exchange information with each other," Olinger said.
The cost of the project has sparked discussion in the Chamber of Deputies. €226 million over five years – a sum many MPs consider enormous "for a computer programme."
According to the ACD, however, the project involves much more than just software. Olinger acknowledged the size of the budget but pointed out that it covers not only the digital solution but also the processing of tax returns, subsequent controls, and ensuring that all taxpayers meet their obligations.
The system is said to be highly complex. The ACD comprises around 70 different services, manages the taxes of 380,000 households and 125,000 businesses, and exchanges four million documents with 111 countries.
The government therefore intends to rely on a "turnkey" solution – software that already exists and only needs to be adapted to the Luxembourgish system. "The complexity of such developments would exceed our capacities," Olinger explained.
"It is, of course, a substantial amount," said MP Franz Fayot of the Luxembourg Socialist Workers' Party (LSAP). Nevertheless, he acknowledged that a more efficient, digitised tax system is a positive development for the country.
At the same time, Fayot warned against over-reliance on foreign tech players. "It is important that we look for European solutions," he stated, stressing that the system would handle highly sensitive information. "Tax information is the most confidential thing people have," he added.
The ACD hopes the overhaul will bring not only greater convenience for citizens but also higher tax revenues. "We think we will generate more tax revenues because we will uncover situations through the new system that we do not see today," explained Director Jean-Paul Olinger.
Olinger clarified that this does not refer solely to deliberate fraud. "Most citizens want to do their tax returns correctly," he said, "but the complexity of the system means that perhaps some incomes are not declared properly."
MP Sam Tanson of the Green Party (Déi Gréng) considers the project necessary but remains sceptical about whether the financial expectations are realistic. She noted that while the ACD assumes the investment will be recouped through higher revenues, no concrete calculation has been made of what this could mean in financial terms.
Despite the push for digitisation, MPs have stressed the importance of preserving human contact. "It is extremely important that not everything just happens behind a screen," Tanson warned. Fayot echoed the concern, noting that taxpayers have a great deal at stake. "It must still be possible to talk to someone [...] so that afterwards you don't just end up talking to chatbots or hanging endlessly in a holding queue," the LSAP MP said.
The ACD has assured that paper declarations will remain possible in the future.
In parallel with the broader digitisation effort, issues with pre-filled tax returns were also discussed in the Chamber of Deputies. The Luxembourg Confederation of Christian Trade Unions (LCGB) had recently pointed out errors in these forms, prompting the Green Party to request that the topic be placed on the agenda.
According to the ACD, however, the problem is more nuanced. The simplified forms are based on data from previous years as well as on information provided by employers or pension funds.
"We noticed that not all the documents were included when we sent out the forms," Olinger explained. He added that certain forms were subsequently corrected by the employers themselves.
This reportedly led to some pre-filled forms being partially inaccurate. However, the ACD does not consider it a widespread issue. Of 450 forms returned so far, over 400 are said to have been correct.
For Tanson, it remains important that citizens are not penalised by administrative complications. "We received a commitment from the Minister that if an error is found, you do not have to submit a completely new declaration," she said, stressing that this would truly constitute administrative simplification.
The government aims to process 85% of tax returns digitally by the 2028 tax year. Here too, doubts have been raised about whether this timeline is realistic. "It now remains to be seen whether this timing will be adhered to," Tanson said.
The Director of the ACD also made clear that the project will require considerable time. "There will be modules of it that will be implemented long after 2028," Olinger said.
