February 13, 2019
In the general election late in 2018, the Luxembourg governing coalition, led by liberal democrats (DP), with socialists (LSAP), and greens (Dei Greng), was re-elected for a new parliamentary term, lasting until 2023.
The coalition agreement has now been finalised and we present its main points here.
It includes digitalisation applied to more or less everything, solidarity, lower taxes, development of Luxembourg as a financial centre and free public transport, not to mention legalisation of the recreational use of cannabis, and investment for the climate and for business.
- Digitalisation
Reading the coalition programme leaves no room for doubt that the new government intends to make Luxembourg into an economy that is modern, green and focused on the future via new technologies. Every area of the economy is seen from the viewpoint of what digitalisation can bring to it. Following the example of “e-Estonia”, the Luxembourg government intends to make public services more accessible to residents, by making all interactions with government available online, with chatbots, and the implementation of mobile payment methods.
It is an entirely praiseworthy ambition, and OneLife is moving in the same direction, using digitalisation to bring ourselves closer to our users.
- Will Luxembourg be seen worldwide as a flagship of modern policy?
In its social policy, the new government is promoting a modern concept of the family, with medically assisted reproduction, and the introduction, with conditions, of provision for surrogacy, enabling two people of the same gender to be named as parents on a child’s birth certificate.
It also aims to facilitate improved work-life balance, through the introduction of two additional days of leave and investment in housing.
Another flagship measure which will attract universal attention is the intention to decriminalise, or even legalise under certain conditions, the recreational use and local production of cannabis, in order both to combat criminality and drug trafficking networks, and to guarantee product quality and collect substantial future tax revenues.
- Reforms to combat climate change
Influenced by one of the coalition parties, the government’s programme has clearly shifted in favour of the environment, with the development of new sustainable infrastructure (600 km of cycle paths to be created in a country with an area of 2586 km2! ), a commitment to green energy and a national transport strategy, including soft mobility and the flagship measure which will make Luxembourg a leader in this field: the abolition of charging on all public transport from the first quarter of 2020.
However, the removal of charging will be compensated by the introduction of more radar speed detectors on Luxembourg’s roads…
- The business environment: stability and the development of Luxembourg as a financial centre
As for the business environment, the government is firmly committed to the direction taken by its predecessors, with the introduction of the register of beneficial owners, ATAD (Anti-Tax Avoidance Directive), ATAD 2 and a common corporate tax base for all Member States of the European Union.
We are pleased that the aim to provide stability and to develop Luxembourg as a financial centre is the top priority for the new government. This is a recognition of the importance of the financial (and insurance) sector which contributes nearly 30% of Luxembourg GDP and provides tens of thousands of jobs in the economy. The coalition has undertaken to continue its effort to maintain the Grand Duchy’s credit rating at the highest level, a confirmation of confidence in Luxembourg and an essential contribution to its attractiveness as a financial centre and for the economy as a whole.
The coalition agreement also highlights the sector’s capacity for innovation and the high levels of expertise which together make Luxembourg one of the most competitive financial centres in the world. The competitiveness of its financial markets is reflected in particular by many relocations and the increasingly strong presence in Luxembourg of major players coming from the UK in the context of Brexit.
Luxembourg aims to be a leading player in sustainable finance, ICT, insurance, and investment funds, and regulation is seen from the perspective of an objective of creating competitive advantage for Luxembourg by providing assurance of credibility and quality.
As for tax, there is a planned reduction of 1% on corporation tax, and an extension of the band in which the extra-low rate for SMEs is applicable (from €25,000 to €175,000). The government is thus not aiming to “increase fiscal pressure on companies but to attract new taxpayers and increase the activity and revenues of existing taxpayers”.
- Sustainable finance and investment for the future
As a founder member of the European Union and the Eurozone, and a leading financial centre, Luxembourg aims to be a force for stability, development and European integration.
The coalition therefore aims to attract and develop the financial sector as a European hub, by attracting and developing high value-added businesses, drawing in talent by strengthening provision for highly-skilled workers, increasing employee involvement and developing profit-sharing.
Building on the success of UCITS funds, the Government plans to place particular emphasis on the development of alternative investment funds and will ensure that the legislative and regulatory framework is favourable to their future development, in order to consolidate its established first mover advantage.
The subscription tax applicable to investment funds will not be increased and fiscal measures will be taken to support the development of socially responsible investment funds, micro-finance, blockchains and crowdfunding.
To sum up, this is an ambitious programme which should enable Luxembourg to extend its influence as a modern society and a leading European and international financial hub, both as a result of its legal and financial stability and through the development of high value-added business which will strengthen its financial and insurance sector.
Do you want to know more, in particular about how our Luxembourg cross-border life-insurance solutions can help you? Contact us!
Author: Jean-Nicolas Grandhaye
