Gilles Roth, Luxembourg's Minister of Finance;
Credit: Chambre des Députés
On Thursday 30 November 2023, Luxembourg's Minister of Finance, Gilles Roth, presented Bill No. 8343 on the adaptation of personal income tax brackets to members of the Finance Committee of the Chamber of Deputies (Luxembourg's parliament).
This presentation followed the approval of the bill by the Government Council (cabinet) on Monday 27 November 2023.
Luxembourg's Ministry of Finance recalled that this bill aims to adjust the personal income tax brackets by four index brackets from 1 January 2024, in line with the new coalition agreement for 2023 to 2028.
The ministry described the planned measures as "a first step" in a more general approach aimed at reducing the tax burden on households, amid the current "difficult economic situation and the polycrisis context".
Finance Minister Gilles Roth commented: "I am delighted to be able to present this first measure resulting from the coalition agreement only a few days after the new government takes office. Thanks to this initiative, we are sustainably reducing the tax burden on households. We are thus strengthening their purchasing power, which will also benefit businesses and businesses. Our action will not stop there. In the medium term, our objective is to fully adapt the scale to inflation."
The Finance Ministry added that the tax relief provided for by the bill is also in line with the agreement between the government, the UEL Luxembourg Employers' Association and the LCGB, CGFP and OGBL trade unions following the tripartite committee meeting of 3 March 2023, which had already provided for an adaptation of the scale to the tune of 2.5 index brackets - to which would be added an additional 1.5 index brackets.
Concretely, the bill provides for an adjustment of tax brackets of 10.38% compared to the rate applicable since 2017.
According to the ministry, for a taxpayer in tax class 1 with an annual gross salary of €75,000, this implies an annual net gain of €1,095 in 2024. Taking into consideration the economic tax credit (CIC) applicable in 2023, the annual gain would amount to €567.
For a couple with a gross annual total of €125,000 (of which the salary of the first person represents two-thirds and that of the second represents one-third of the total), the change compared to 2023 would amount to €2,189. Their tax burden will therefore decrease by 10.9%, added the ministry. Taking into account the CIC applicable in 2023, this would amount to €1,333.
Moreover, the adaptation would result in an additional €1,160 in 2024 for a taxpayer in tax class 1a with an annual gross salary of €50,000. This corresponds to a reduction in the tax burden of 19.8%. Taking into consideration the CIC applicable in 2023, this would amount to €709.
The forecast impact of this measure on budgetary revenue is estimated at €480 million. This corresponds to a fiscal income reduction of €180 million compared to 2.5 index bracket reduction retained in the tripartite agreement.
The parliamentary Finance Committee will now analyse the bill, which, according to the Chamber of Deputies, must be adopted before the Christmas break if it is to come into force on 1 January 2024.
