Interview: Minister Gilles Roth Outlines Finance Priorities

Following the legislative elections of 8 October 2023 and several weeks of coalition talks, the new CSV-DP coalition government of Luxembourg was sworn in on 17 November 2023.

Chronicle.lu reached out to the new members of the Luxembourg government to learn about their priorities one month on, as well as the challenges and opportunities facing their particular sector(s) - and how they will spend the end-of-year holiday period.

Next up was Gilles Roth, Luxembourg’s Minister of Finance.

Chronicle.lu: The new government was sworn in on 17 November 2023. One month on, what are your top three / main priorities as Luxembourg's Minister of Finance?

Minister Gilles Roth: I have four key priorities:
1. to strengthen the purchasing power of households in the short term;
2. to maintain and enhance the competitiveness of our companies;
3. to further strengthen the attractiveness of our financial centre;
4. to ensure sustainable public finances.

Overall, my aim is to implement a responsible fiscal policy that prepares Luxembourg for the future. In this context, we will continue to invest in our infrastructures. However, it is crucial that our debt remains manageable. Responsible policy also means being able to act promptly. In the immediate term, we are taking the necessary measures to address the pressing problems of our citizens. As one of my first actions as Minister, I’ve submitted legislation to enhance people's purchasing power by adjusting the tax brackets to inflation by an equivalent of four indexation tranches as of 1 January 2024.

Chronicle.lu: How does your new ministerial role compare to / differ from your previous position(s), for example as Mayor of Mamer? In what way(s) do you feel your previous position(s) and experience can contribute to / be of use in your new role(s)?

Minister Gilles Roth: I have spent my career in the service of Luxembourg and my fellow citizens. My experience in local politics means that I have a keen understanding of what people care about and what their concerns are. I was elected to the municipal council of Mamer in 1993 and then served as a mayor from 2000 until I took office as Minister of Finance. This was a long and enriching experience. Given that I spent many years working at the Ministry of Finance at the beginning of my career, you could say that I am in fact returning to my old "home". It was therefore a rather emotional moment when I received the key of the Ministry from my predecessor after seventeen years in parliament.

My posting at Luxembourg's EU representation in Brussels early in my career also helped me get a good sense of the inner workings and processes in the EU institutions. Given my background in fiscal and tax matters, in parliament I specialised in finance matters and have therefore closely followed all political decisions, both as a majority and opposition MP. My role in the Budget & Finance Committee, on which I sat for years, has given me ample opportunity to prepare for my new role.

Today, I am proud to move our country forward as Finance Minister, together with my team at the Ministry, and ensure that the priorities of this government are achieved.

Chronicle.lu: What do you see as the (three) biggest challenges currently facing Luxembourg's financial sector and how does your ministry plan to overcome / address them, particularly in the coming months?

Minister Gilles Roth: The main challenges I currently see are access to talent, increasing the competitiveness of our financial centre and the promotion of cross-border financial services in the EU. The development of the financial centre is an absolute priority for me.  After all, it accounts for a quarter of our economy's added value and employs more than 65,000 people.

While access to and retention of talent is an all-of-government effort, as Finance Minister I am committed to further improve the profit-sharing regime as well as our expat regime. I also want to explore tax incentives for companies that support their young employees in renting accommodation.

In the short-term, I want to adjust the subscription tax for so-called actively managed ETFs to ensure that Luxembourg is an attractive jurisdiction for this emerging product class. I will also look into potential additional tax reductions for ESG funds. The government will further strengthen our network of double tax treaties, and I want to improve and modernise the exchange and dialogue between our administrations and our companies and citizens. Finally, I will continue to modernise our financial sector legislation to allow firms to seize new opportunities.

At the EU level, I will defend the interests of cross-border financial services, which are the bedrock of our financial centre, and a European single market that remains open to the rest of the world. European investors and companies need to have access to best-in-class services wherever they may be located. The expertise of financial centres like Luxembourg, which have developed know-how and specialised over decades, will be key to delivering a Capital Markets Union that works for citizens and businesses across the EU. Moreover, we need smart regulation, not simply more regulation.

Chronicle.lu: What are the (three) biggest opportunities for Luxembourg's financial sector and how will your ministry leverage these opportunities, particularly in the coming months?

Minister Gilles Roth: Luxembourg is and remains a stable country with sound public finances: this is key for global investors, financial institutions and their clients. We are also the third most international financial centres after the UK and the US, and we have developed a unique expertise in providing cross-border financial services and products. We need to build on these strengths.

My overall objective, and where I see the biggest opportunities, is to allow our financial centre to climb up the value chain across all its key sectors, from banking to asset servicing, insurance to capital markets. Sustainable finance and digitalisation are transversal enablers in this regard.

One example is the area of digital assets and tokenisation. Luxembourg has made a name for itself with its pioneering blockchain legislation, with several landmark issues of digital bonds under Luxembourg law and the launch of the global digital platform in Luxembourg by a large international bank. I want to continue in this vein by creating a conducive environment for this emerging sector. 

I also want to encourage the further growth of Luxembourg as a hub for private assets and alternative funds. With the increasing growth of alternative funds in Luxembourg, we have also managed to attract new service providers and institutions to Luxembourg, which in turn creates new jobs and revenues. The same is true for corporate banking, where we have recently seen the arrival of big names from the US and the UK, who want to serve their customers in Luxembourg. I will encourage these developments by further adapting and modernising our legislative framework, but also be a first mover in implementing relevant EU texts.

Finally, I am planning to further strengthen Luxembourg's role as a global hub for sustainable finance. I have several initiatives in the pipeline, including a project to boost green Fintech.

Chronicle.lu: How will the adjustment of personal income tax brackets benefit individuals in Luxembourg, particularly in the short term (early 2024)?

Minister Gilles Roth: This adjustment is the first measure that we promised and became then the first law I submitted to Parliament after I took office. It strengthens people's purchasing power in the short term and is therefore a key priority. By adjusting four indexation tranches, people will receive more in net terms at the end of the month. This measure is structural, meaning that it applies not only one year, but also every year from 2024 on. For instance, a single parent in class 1a with a gross annual salary of €50,000 will pay €1,160 less tax in 2024. This corresponds to -19.8%. A married couple in tax class 2 with a gross annual salary of €125,000 will benefit from a tax reduction of €2,198 in 2024. This corresponds to -10.9% less tax. A single person in tax class 1 with a gross salary of €30,000 will pay -14,7% taxes less in 2024, which is -€448.

Chronicle.lu: With an estimated -€480 million impact on budgetary revenue, how will such a measure be financed?

Minister Gilles Roth: In view of the economic situation, we must pursue a counter-cyclical policy, i.e. keeping public investments high, revitalising the construction sector and strengthening the competitiveness of our economy. In addition, the tax cut measure will push the purchasing power of the population which will in turn consume more. Thus, companies will profit directly from this measure. This results in more economic growth, which means higher tax revenues. It's a virtuous circle, a project, that will boost our economy. We are convinced that both people and the economy will benefit from this measure - and ultimately, of course, the economic cycle too.

Chronicle.lu: Moving away from politics, what are some traditions or activities (if any) you (will) enjoy during the end-of-year (Christmas and New Year) holiday period? Any New Year's plans or resolutions you could share with our readers - or another message as 2023 draws to a close?

Minister Gilles Roth: Christmas is a good moment to take a step back and be grateful and to have the opportunity to spend time with the people who are nearest and dearest to us. It gives you so much. In this sense, I believe that after the Christmas break, I will come back with renewed energy and perseverance to undertake this important role I have been entrusted with. I am committed to fulfil my task in the best possible way, through excellent co-operation with the staff at the Ministry and the administrations, but also in a spirit of dialogue and respect with the opposition parties. I am working towards a broad consensus, whenever and wherever possible. This is a conviction that has grown with experience and for which I don't need any New Year’s resolutions.