Following the government's announcement of a new package of fiscal measures, the Union des Entreprises Luxembourgeoises (UEL) has called for strict controls on government expenditure to remain on the agenda, particularly as the country finds itself during a boom time.
The UEL commented that the vast majority of the measures are consistent with the social ambition that was announced as a priority of the reform, indicating a greater social redistribution and better tax benefits selectivity corresponding to demands that have long been made by socioeconomic actors.
The UEL highlighted the fact that many of the measures are aimed at households and respont to comments made by the Economic and Social Council with the approval of business representatives, expressing its hope that these measures would result in a positive impact on the local economy.
The Union further stated that in terms of measures targeting commercial companies, government action remains "homeopathic". It claimed that the government decision to lower the IRC tax rate of countries in direct competition with Luxembourg due to lack of predictability on OECD initiatives and the European Commission, has resulted in an IRC reduction rate that is insufficient to keep Luxembourg from the second half of the OECD's comparative tables. Furthermore, it commented that this shy step in the right direction will be offset by broadening the tax base and by a further increase of the minimum tax on SOPARFIs, what it deemed a repetitive measure which casts doubt over the policy on the fiscal predictability and stability of the country.
Apparently the government must remain aware the this tax uncertainty could poison investment, which is currently only mitigated by the fact that some other competing jurisdictions are also suffering. According to the UEL, only a competitive tax policy that attracts foreign investors will allow a government in an open economy such as Luxembourg to hold the necessary means to offer a generous tax environment for households in the future.
The UEL subsequently stated that it is waiting for a real tax reform for companies that will equip with country with competitie tax benefits, all in line with the increased demand for transparency and fiscal justice. It announced that it maintained its idea of merging the IRC, the ICC and the ISF to offer corporations unified global levels in the interest of administrative simplification and tax appeal.
However, the UEL did show support for certain measures, particularly with regards to those benefitting SMEs in the way of lower taxes for small profits. The UEL stated that temporary tax relief on real estate gains will also help boost the property market and offset to some degree the recent increase in VAT on real estate.
The UEL concluded its statement by calling on the Luxembourg government to consider other measures specifically supporting investment, such as an expanded investment bonus, the introduction of a tax exempted reserve for investment or deductibility for investments in start-ups.
