Luxembourg Finance Ministry Efforts Characterised by Crisis Management in 2022

Luxembourg's Ministry of Finance has published its annual report for 2022, which includes all the activities and projects carried out during the year in question.

This report covers not only the Ministry of Finance, but also the administrations under its supervision, including the financial control directorate, the Inspectorate of Finance and the State Treasury.

Luxembourg's Minister of Finance, Yuriko Backes, commented: "When I took office, the end of the pandemic was a sign that life would return to its pre-crisis course. This perspective was soon to be disrupted by Russia's invasion of Ukraine and its repercussions on the level of energy supplies in Europe, with, as a corollary, an economic recession which was looming on the horizon. 2022 was therefore a year during which the majority of the efforts of the ministry, but also of the administrations under its supervision, were concentrated on the management of multiple crises. I would like to sincerely thank my teams for their unfailing commitment and dedication."

Following two tripartite coordination committees, in March and September 2022, the government, together with the social partners, put together several packages of measures to support households and businesses. With a total cost for 2022 and 2023 of more than €2 billion, the "Solidaritéitspäk" (solidarity packages) measures have positively impacted investments and private consumption, while effectively curbing inflation, according to the Finance Ministry. A central element of the system was the postponement of the second wage indexation to April 2023 and the compensation (or overcompensation) of the latter, with an energy tax credit of up to €84 per month, depending on one's salary.

Throughout the year, the financial centre continued to actively contribute to efforts to support the economy, noted the ministry. In July 2022, the Minister of Finance signed an agreement with several banks, providing a framework for the state-guaranteed loan scheme of up to €500 million.

With the 2023 budget, presented in October 2022, the government introduced measures to strengthen, on the one hand, social cohesion and the purchasing power of households and, on the other hand, to further consolidate the competitiveness of the Luxembourg economy. The ministry noted that the 2023 budget introduced a major reduction in the tax burden of single-parent families, by substantially increasing from 1 January 2023 the maximum amount of the single-parent tax credit from €1,500 to €2,505. To meet the challenges associated with attracting talent and recruiting skilled labour, the minimum remuneration threshold of €100,000 under the highly qualified worker (impatriate) scheme has been lowered to €75,000 and the scope of calculation of the participatory premium has been extended.

The Finance Ministry has also worked closely with Luxembourg for Finance (LFF) to further promote, develop and diversify the financial centre, both geographically and thematically, particularly in the areas of sustainable finance and fintech.

Assets under management (AUM) in Luxembourg-domiciled environmental, social and governance (ESG) funds amounted to €2.2 trillion at the end of June 2022. That same year, the Luxembourg Stock Exchange (LuxSE) surpassed 1,500 listed sustainable bonds. Since 2016, these have made it possible to raise more than €800 billion to finance environmental, social and sustainable projects around the world.

In 2022, thirteen new bills prepared by the Finance Ministry were tabled, 27 Grand-Ducal regulations were published and fifteen laws were passed. In addition, there were 191 answers to parliamentary questions, compared to 148 the year before.

In addition to regular exchanges with local professional organisations, the Minister of Finance met more than 90 companies in the financial sector at group management level in the United States and in Asia, Europe, as well as in Luxembourg, to discuss their strategic priorities in the European market and the development of their activities in the Grand Duchy.

At the European level, Minister Backes participated in eleven Eurogroup and Economic and Financial Affairs Council (ECOFIN) meetings in 2022. Luxembourg also submitted the first request for payment under the national recovery and resilience plan. In December 2022, Luxembourg submitted a first payment request for €24.86 million.

Finally, the ministry worked to expand and modernise its network of tax treaties, which now includes more than 80 countries. The ministry highlighted, for example, a bill related to the tax treaty between Luxembourg and Belgium and the amendment to the France-Luxembourg agreement on cross-border teleworking.