On Monday 15 June 2026, the Chamber of Employees (CSL) announced that it unanimously adopted its opinion on the draft law implementing a single tax class but stated that it does not regard this as the major tax reform it has long called for.
On behalf of the Government, Luxembourg’s Ministry of Finance intends to reform the amended Income Tax Law of 4 December 1967, principally through the introduction of a single tax class applicable to individuals and, consequently, through the historic abolition of the three tax classes 1, 1a and 2 that are still in use today.
In response to this, the CSL said it recognised several positive aspects of the reform. These included the proposed tax relief for low and middle-income earners, the simplification of the system through the abolition of tax classes, the increase in certain deductible limits, the introduction of a small-child allowance and the mechanism for adjusting tax bands in line with inflation. It noted that although still insufficient, these changes were a “move in the right direction”.
However, according to the CSL, the draft law does not amount to a fundamental overhaul of the Luxembourg tax system, but rather an adjustment to the way households are taxed. It remarked: “While this development is far from insignificant from a societal perspective, it leaves untouched the principal structural inequalities that the CSL has criticised for many years.”
Among the issues expressed by the CSL are how income from capital continues to benefit from “significantly more favourable treatment” than income from work; tax provisions such as the expatriate tax regime and the profit-sharing bonus continue to weaken tax fairness; and large fortunes remain untaxed while wealth concentration has reached extreme levels.
The CSL noted that the absence of inheritance tax on direct-line succession perpetuates inherited inequalities that are difficult to reconcile with the principle of meritocracy. At the same time, the numerous nominal parameters within the tax code continue to lose value in real terms, creating what the CSL described as a hidden tax increase that primarily affects low and middle-income households. Moreover, the tax burden continued to shift towards households, while the taxation of businesses had steadily decreased over the years.
In relation to the cost of the reform, the CSL stressed that a responsible tax policy must ensure that the State has sufficient and fairly collected resources on a sustainable basis in order to fulfil its responsibilities and guarantee high-quality public services.
A requirement the CSL said is all the more important in a context shaped by geopolitical upheaval and the considerable challenges associated with the digital, environmental and demographic transitions. It stressed: “Faced with these challenges, the State must preserve sufficient budgetary capacity to meet society’s needs.”
From this perspective, the CSL advocated that a more balanced tax system “would not merely represent an additional measure of social justice but an essential condition for the effective functioning of the State and the long-term sustainability of its responsibilities”. The CSL warned against any future attempt to justify austerity measures or reductions in public services on the grounds of deteriorating public finances resulting from lower tax revenues caused by the reform.
The CSL said: “A more ambitious and fairer reform would have been possible. It could have corrected the imbalances within the system while creating new sources of revenue to offset at least part of the reform’s cost, which has already been largely pre-financed by households themselves as a result of the non-neutralisation of index-linked tax bands accumulated over almost a decade.”
According to the CSL, this mechanism will have generated approximately €3.4 billion in additional tax revenue between 2017 and 2027. In other words, households have already financed a substantial part of the reform from which they are now presented as beneficiaries. The CSL emphasised that this significantly reduced the scale of the announced tax relief.
The CSL remarked: “The automatic indexation of the tax scale to inflation provided for in the draft law is certainly a positive signal, but it remains largely symbolic. Because the adjustment only takes place after the triggering of four index-linked wage adjustments, this approach does not meet the requirements of effective purchasing power protection or a genuinely coherent tax policy. The CSL therefore calls on legislators not to regard this draft law as the completion of the modernisation of Luxembourg’s tax system. It should be viewed for what it is: a cautious first step towards a comprehensive tax reform that has yet to be developed.”
It added: “The truly ‘Copernican’ reform of Luxembourg taxation — one capable of reconciling tax fairness, social cohesion and fiscal sustainability — requires a determined effort to address all of the structural imbalances within the tax system. In its current form, the proposed reform introduces certain improvements but does not meet expectations for a deep modernisation of Luxembourg’s tax system. In essence, it leaves the status quo of tax inequalities largely unchanged.”
