On 2 October 2012, Luc Frieden, the Finance Minister, submitted the 2013 budget bill to the Parliament.
In his speech, M. Frieden announced limited austerity measures in order to address the increasing hardship economic situation in Europe. These measures complement those presented in 11 May 2012 by the Prime Minister Jean-Claude Juncker in his annual «State of the Nation» speech.
The most salient envisioned tax measures may be summarized as follows:
- Increase of the solidarity surcharge for individuals from 4% to 6% (high net worth individuals may be subject to a 8% surcharge);
- Increase of the solidarity surcharge from 5 % to 7% for corporations, the aggregate maximum corporate income tax rate would therefore increase from 28.80% to 29.22% in Luxembourg-city (i.e. 22.47% corporate income tax including the 7% surcharge tax with the 6.75% municipal business tax) ;
- Introduction of a new minimum corporate tax ranging from EUR 500 for small companies to EUR 10,000 for corporations whose balance sheet exceeds EUR 10 million;
- Reduction by half of the deduction for "debit interests";
- Reduction of the travel expenses allowances;
- Increase in excise duties on tobacco and diesel.
Some other measures can be pointed out such as:
- Subsidies reduction for communal projects: in the medium term, government subsidies will be transferred to the municipalities according to their financial capacity;
- Absence of pensions adjustment for 2013;
- Abolition of education allowance ("Mammerent") for mothers already benefiting from their own pension;
- Increase of family participation for service vouchers (end of gratuity for the three first hours for households whose income exceeds three and a half of the minimum wage);
- Abolition of premiums for cars with low CO2 emissions with the exception of electric cars.
The budget 2013 in main figures:
- Objective of growth of 1,7% (1% for the euro zone);
- Inflation raise to 2%;
- EUR 14,2 billion in spending and EUR 12,9 billion in revenue implying public deficit of EUR 1,3 billion or 2,8% of Luxembourg's Gross Domestic Product (GDP);
- Investment expenditure are planned at a high level (EUR 1, 7 billion or 3.8% GDP). Around 0.6% of GDP will be invested on research, while corporate subsidies increase by 1.5%;
- Public debt will increase to 25% of GDP in 2013 (from EUR 9,3 billion to EUR 11,8 billion in 2013), maintained however at lowest rate among the European Union countries, far from the threshold of 60% of GDP set by the Europe and that many major countries have already exceeded.
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