Pierre Gramegna, Luxembourg's Minister of Finance; Credit: SIP / Yves Kortum

On Monday 1 March 2021, Luxembourg's Minister of Finance, Pierre Gramegna, presented the country's public finances as of 31 January 2021 during a joint meeting between the Finance and Budget Committee and the Budget Execution Control Committee of the Chamber of Deputies (Parliament).

Central government revenue amounted to €1.8 billion at the end of January, which corresponds to an increase of 2.8% over one year.

On the one hand, revenue collected by the administration of direct contributions (Administration des contributions directes) amounted to €791 million, up 8% compared to January 2020. Those of the administration of registration, domains and VAT (Administration de l'enregistrement, des domaines et de la TVA) also increased to €707 million (up 2% over one year).

On the other hand, the revenues of the Customs and Excise Agency (Administration des douanes et des accises) remain under pressure due to the combined effect of successive increases in excise duties, including the introduction of the CO2 tax, as well as health measures and increased teleworking. As of 31 January 2021, revenue amounted to €120 million, down 22.4% compared to the previous year.

Government expenditure amounted to €1.9 billion in January 2021, which is equivalent to a decrease of 3.4% compared to January 2020. Operating costs fell by 1% over one year, while social benefits financed directly by the state (including in particulat partial unemployment-related expenditure) increased by 9%. Excluding purely accounting transactions, expenditure on direct and indirect investments amounted to €103 million in January 2021, thus remaining at the same level as in January 2020.

As public revenues increase and public expenditure decreases, a positive jaws effect has emerged, leading to a slight improvement in the government balance on an annual basis. The deficit thus fell from €270 million at the start of 2020 to €152 million at the start of 2021.

Finance Minister Pierre Gramegna commented: “Despite the first encouraging signs at the start of the year, the public finance situation on 31 January 2021 does not yet allow us to see a definitive trend, especially in an economic context which remains marked by an unprecedented health crisis. The resilience of certain tax revenues, however, testifies to the solidity of our economic fabric, while the evolution of expenditure faithfully reflects the priorities of the government, both in terms of social protection and with regard to public investments, which remain at particularly high levels. While it is too early to draw conclusions on the basis of the figures observed in January, I am confident that the 2021 financial year will be better than that of 2020 and that public finances will move in the right direction. The services of the Ministry of Finance and the General Inspectorate of Finance will continue to closely monitor budget execution in the coming months".