Luxembourg: Selected Issues

International Monetary Fund

No 2024/156, IMF Staff Country Reports from International Monetary Fund

Abstract: This Selected Issues paper explores implications for safeguarding fiscal space in Luxembourg. The analysis discusses the main drivers of revenues and expenditures in recent years. Against the background of rising ageing costs, the analysis discusses the fiscal outlook, accounting for the announced government plans, as well as fiscal risks. Additionally, it offers options for helping to safeguard ample fiscal space, in view of the spending pressures and risks. In order to preserve its ample fiscal buffers, which will support the government’s commitment of keeping Luxembourg’s AAA rating, a more prudent fiscal policy would be advisable. Recent revenue increases should not be taken as given, and additional tax reforms should be done in a budget-neutral manner. The growth of compensation of employees should be limited, social programs better targeted, and their efficiency increased. Early pension reform would also help limit spending pressures. Finally, a national framework could help anchor fiscal policy and maintain a credible commitment to prudent fiscal policies.

Keywords: personal income taxation; copyright page; ample fiscal space; spending pressure; CIT revenue; property taxation reform; GDP share; Corporate income tax; Social protection spending; Personal income tax; Global (search for similar items in EconPapers)
Pages: 17
Date: 2024-06-07
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