According to Luxembourg’s Chamber of Commerce, the Grand Duchy’s new fiscal reform is a step in the right direction, although there is still room for improvement.
Last July, the Luxembourgish Government filed its draft bill for fiscal reform with the Chamber of Commerce. The bill encompasses the Chamber’s four leading principles; fairness, selectivity, sustainability and competitiveness.
Some of the proposed laws most notable features include the possibility of different forms of repayment, an increase in the rate of bonuses for complementary investment, and the decrease of the standard rate of the Internal Revenue Code (IRC), among others.
However, there remain three areas in which this new reform could be improved. The first is that it lacks a total or even partial reconsideration of wealth tax, new arrangements for intellectual property and even a new design for property taxation.
Secondly, some of the measures included in the reform are not very ambitious. For instance it encompasses reduced corporation tax from 29.22% currently to 27.08% in 2017 and 26.01% in 2018. Whereas it would have been more important, according to the Chamber of Commerce, to focus on the needs of corporations with a revenue below €25,000 per year.
Thirdly, the Chamber of Commerce claimed that some measures should be avoided altogether, especially with regard to corporation taxation and the introduction of a limitation on the reporting of losses.
Finally, the reform’s sustainability is questionable. So too with attempts at creating fairness, selectivity and competitiveness. For instance, the cost of the reform is quite high. Whilst the government has estimated a cost of 1% of the GDP, others have stated it will cost 1.5%.
That being said, the Chamber of Commerce has offered suggestions for possible improvements to the new fiscal reform. For instance simplifying the taxation of actual persons and corporations, as well as a reform of household taxation to favour complementary pensions in businesses.
