Last weekend, the G7 agreed to move forward with plans to introduce a global minimum corporate tax rate. According to Nicolas Mackel, CEO of Luxembourg for Finance, the Grand Duchy's financial sector is not too worried about the agreement. Mackel stated that the agreement was "part of a way, which Luxembourg has been following since the beginning". Nevertheless, he acknowledged that it is a "historic" and "interesting" step. If the new international corporate tax rate became reality, multinational groups would be required to pay taxes not only in the countries where their headquarters are located, but also in every country they are doing business in. In addition to profits, they would then also have to pay taxes on their overall revenue.
However, Mackel stressed that the success of Luxembourg's financial centre is "by far" not only due to fiscal policies. When confronted with the statement that one of the reasons international companies nevertheless choose to move to Luxembourg comes down to the Grand Duchy's favourable fiscal policies, the CEO of Luxembourg for Finance argued that those companies have other reasons as well. According to Mackel, those reasons mainly come down to companies providing the country with "insurances" and Luxembourg regularly receiving a "Triple A" rating. This "assures" the companies, Mackel explained. In addition, he pointed out the numerous efforts of the EU and the OECD, which have made fiscal optimisation "not impossible, but a lot more difficult".
The fact that, despite high revenues, the US online retailer Amazon paid little to no taxes through its Luxembourg-based European headquarters in 2020, has to do with Amazon's decision to reinvest its revenues, causing the company to make a loss, Mackel explained. In turn, the reason that Amazon CEO Jeff Bezos has nevertheless become even wealthier is due to the fact that Amazon's share value increased. However, he would advise Bezos to hire a better PR team, the CEO of Luxembourg for Finance added. Instead of buying a 500-million-dollar yacht and being criticised for it, the Amazon CEO should use his fortune to support charities, Mackel stated.
While fiscal policy is not the reason behind the success of Luxembourg's financial centre, Mackel concluded, he still cautioned politicians not to keep increasing taxes. Mackel stated that, in his eyes, tax increases are like "sugar" or "drugs" for some people, but not a solution from an economic point of view.
