On Monday 17 May 2021, Luxembourg's Minister of Finance, Pierre Gramegna, presented the country's public finances as of 30 April 2021 during a joint meeting between the Finance and Budget Committee and the Budget Execution Control Committee of the Chamber of Deputies (Parliament).
In line with the first signs of recovery observed during the presentation of the situation as of 31 March, the figures observed at the end of April 2021 confirmed a certain return to normal, while highlighting the major impact of the first wave of the COVID-19 pandemic on the health of public finances during the year 2020.
Luxembourg's Minister of Finance commented: “I am delighted with the now confirmed recovery of our public finances. Even if tax revenues have experienced a spectacular increase of 21.4% compared to the first four months of 2020, the comparison must be qualified because of the major impact that the outbreak of the pandemic had at the time on collecting taxes and levies. Likewise, if spending fell by 4.4% on an annual basis, this figure reflects in particular the cost of the considerable state support provided last year to meet the urgent needs of citizens and businesses during the first peak of the crisis". He continued: "Thanks to the now positive jaws effect between revenue and expenditure, the budget balance has therefore clearly improved compared to 2020 and was almost balanced on 30 April 2021. This should not however be interpreted as meaning [it was] balanced at the end of the year, because payments attributable to the 2021 financial year will be made according to the rules in force until the month of April 2022".
Regarding tax revenues, the administration of direct contributions (Administration des contributions directes - ACD) collected close to €3.4 billion by the end of April 2021, thus representing an increase of €376.9 million or 12.5% compared to April 2020.
Revenue from the administration of registration, domains and VAT (Administration de l'enregistrement, des domaines et de la TVA - AED) also increased to almost €2.4 billion, up €589.6 million or 33.3% compared to the previous year. VAT receipts for the month of April 2021 amounted to €331.7 million, an increase of 441.1% compared to the previous year; this result showed to what extent the first lockdown last year affected the collection of corresponding revenues.
In addition, the revenues of the Customs and Excise Agency (Administration des douanes et des accises - ADA) amounted to around €531.4 million, which represents an increase of €31.3 million, i.e. a capital gain of 6.3% compared to 2020. The increase in annual comparison is attributed to the fact that the country was partially at a standstill during the same period last year. However, due to the combined effect of the new CO2 tax, as well as the generally reduced mobility due to the use of teleworking, fuel volumes remained around 25% below sales levels in 2019, thus contributing to the achievement of the government's greenhouse gas reduction objectives.
At the end of April 2021, total government expenditure amounted to €7.2 billion, a decrease of 4.4% over one year. This favourable development is explained by the significant additional expenditure made during the same period in 2020 as part of plans to stabilise the economy. For instance, social benefits in kind, which notably include short-time work, have fallen by €358.4 million or 32.7% compared to the first four months of 2020.
Excluding a purely accounting transaction, direct and indirect investments increased by €11.4 million or 2.1% compared to the end of April 2020.
According to the European System of Accounts (ESA 2010) approach, the Luxembourg government thus posted a deficit of €29 million at 30 April 2021, which represents an improvement of €1.6 billion compared to the same period in 2020 .
Finance Minister Pierre Gramegna concluded: “The results observed at the end of April - and the government's balance now close to balance - confirm that the improvement in the budgetary outlook presented to the Stability and Growth Programme a few weeks ago is well and truly in progress. Thanks to the gradual opening of our economy, combined with the rapid progress of the vaccination campaign, I am confident that economic activity is more and more returning to normal and that the recovery launched will bear fruit for businesses and all citizens".
