On Monday 22 March 2021, Luxembourg's Minister of Finance, Pierre Gramegna, presented the country's public finances as of 28 February 2021 during a joint meeting between the Finance and Budget Committee and the Budget Execution Control Committee of the Chamber of Deputies (Parliament).
Luxembourg's Finance Minister expressed optimism with the results so far this year, stating: “The public finance situation in 2021 is seen in a slightly reassuring light. In fact, revenue totaled €3.4 billion, an increase of 3.8% compared to the same period last year. This finding is all the more comforting as the first two months of 2020 are the only ones that have been spared by the pandemic and thus offer the possibility of a valuable comparison”.
According to the European System of National and Regional Accounts (ESA 2010), the administration of direct contributions (Administration des contributions directes) collected €1,650 million by the end of February 2021, thus representing an increase of 9.5% compared to February 2020. Revenue from the administration of registration, domains and VAT (Administration de l'enregistrement, des domaines et de la TVA) also increased slightly by 1% to €1,148 million.
On the other hand, the revenues of the Customs and Excise Agency (Administration des douanes et des accises) in the first two months of 2021 amounted to €253 million, which constitutes a significant drop of 17.9%. This negative trend is explained by the combined effect of the economic slowdown induced by the pandemic and by the mass use of teleworking, as well as the introduction of the CO2 tax at the start of the year, which reduced the gap in prices at the pump compared to neighbouring countries. At the same time, greenhouse gas emissions have been reduced in line with Luxembourg's climate objectives.
Total government expenditure according to the ESA 2010 amounted to €3.5 billion, an increase of 1.6% compared to the first two months of 2020. Investment amounted to €215 million (up 12.7%).
Revenue growth exceeded expenditure by 3.8%, so that the public finance deficit stood at €117 million after the first two months of 2021, which is lower than the deficit observed in February 2020 (€189 million).
Finance Minister Pierre Gramegna commented: “The positive jaws effect between income and expenditure is an indicator of the economic recovery which is slowly but surely taking shape. This is becoming more and more palpable in light of the fact that, according to the latest STATEC estimates, the fall in GDP in Luxembourg will be limited to -1.3% in 2020, one of the best results in the European Union. These encouraging first figures should not, however, mask the uncertainties about the evolution of the pandemic in the coming months and encourage us to be vigilant in budget execution”.