Essay by Paul Schonenberg
Eight things international companies and their working employees would appreciate from the new Luxembourg Government (and two things our constituents hope will not happen!):
To be clear, AmCham does not speak for the entire foreign community of Luxembourg. By and large, our constituency is mostly composed of first and second-language English speakers who are professionally experienced university graduates with executive or high-level technical jobs, and their families, who live and work in Luxembourg as salaried employees, entrepreneurs, or business owners. Since AmCham Luxembourg has been quite active in organizing election roundtable events and speaking out about business-related concerns of the international community, I have received quite a few requests to clarify what our community would like to see the new government enact as legislative agenda issues.
The 10 suggestions which follow come from a consensus distilled out of conversations with persons of this identified constituency. We hope these suggestions will motivate the recently elected political leaders to take wise positive actions for the purpose of making Luxembourg a more agreeable pro-business environment with a more robust and successful economy.
- Action: Reduce the corporate tax rate from the present level of just under 25% to at least the EU average corporate tax rate of 21%, with 20% being even better. Our goal is to restore Luxembourg’s taxation attractiveness as a preferred corporate location.
- Action: Review to eliminate, simplify and uncomplicate policies and practices impacting residents and companies by reducing paperwork, costs and administrative burden impacts.
- Action: Empower legally existing Luxembourg ASBL charitable not-for-profit organizations to develop and manage government-subsidized micro-housing projects for utilization by single young legally resident working professionals and single retired Luxembourg legal residents. Properly done this action will encourage the release into the market of presently underutilized privately owned family housing while simultaneously making greatly needed single resident housing available for young employees freshly seeking to become employed in Luxembourg and older single workers interested in downsizing and reducing their living costs as they enter into a new phase of their lives, perhaps living at reduced incomes then they had while working.
- Action: Guarantee state banks issue saving accounts and credit cards to all legal residents of Luxembourg on demand. As local bank accounts are critical for so many things, ensuring bank account access will be greatly appreciated by new inhabitants immediately upon their arrival.
- Action: Make English an official legal Luxembourg language to aid new residents to assimilate more rapidly and with less confusion and stress. As an additional benefit, encouraging increased English language fluency will help young Luxembourgers be better prepared for employment opportunities in the global economy within which English is the dominant global language.
- Action: Adjust the current social security retirement policies to allow workers to voluntarily continue to contribute into the social security retirement system beyond age 65 if they have accumulated less than 30 years of social security retirement contributions in the Luxembourg system. Delaying retirement on a purely voluntary basis and allowing the accumulation of additional pension payment entitlements for those with less than 30 years of working contribution entitlement will especially help foreigners who come into the Luxembourg system later in their lives, to have a higher quality of life and avoid poverty in old age caused by insufficient levels of social security income.
- Action: Adjust the current tripartite indexation policy to increase support for high performing younger employees eager to achieve high levels of career success and reduce the current impact of Indexation as a driver of inflation. The current practice as implemented leads to prices throughout the economy being increased simultaneously with the start of each indexation increase, thereby driving inflation as an unintended but unacceptable consequence. Likewise, mandatory indexation across the board for all employees at the same level largely decimates the salary budgets of companies and largely eliminates funds which would be targeted towards rewarding high performing employees, most especially young people just starting their careers. We recommend the currently identified level of the gross indexation money pool be retained as at present, but only 60% of this amount be allocated for distribution to all employees with the remaining 40 % earmarked for discretionary distribution to employees’ below senior executive level. We leave to the government to discourage companies from using indexation implementation as justification for companies to raise prices, but believe it would be a positive signal for tax authorities to adjust tax rates to ensure that indexation implementation does not increase tax revenue to the state by driving employees into higher tax brackets.
- Action: Support education through increased subsidies and tax deductions. The education of our young people to help them be optimally prepared to be successful members of society and lifelong learning of persons needing or looking to acquire additional capabilities, are initiatives worth supporting for the long-range good of society both now and in the future. We would be pleased for the government to make tuition at primary private schools, at universities and lifelong learning fees be considered allowable tax deductions. Additionally, considering parents are struggling by making significant sacrifices to send their children to the ISL , St Georges and other private schools, we would appreciate for the government to raise the level of subsidy to those students to a higher level (Currently this subsidy equals 40% of the cost of a student attending the Luxembourg public schools, which means that the state saves money off its own costs when compared to the costs if the state has to provide the education. While we very much appreciate the existence of a state private schooling subsidy, we believe doubling the subsidy to 80% of the cost of a public school’s student education would be a very supportive gesture to help companies recruit appropriate staff to come to Luxembourg and helping the staff to afford to live in Luxembourg with their family members.)
As mentioned at the beginning of this advocacy essay, there are two things that our international community would very much oppose as policy initiatives of the new government currently being formed. These are:
- We oppose any form of increased taxation on companies or individuals including a national wealth tax, all of which we believe will make Luxembourg less attractive as a business location and all of which we believe will reduce rather than increase governmental revenue.
- We oppose any government-mandated reduction of the current 40-hour working week requirements, and we especially oppose any suggestions to consider any such changes while retaining current salary levels. We do not oppose flexible working arrangements as agreed between individual employees and their employers.
The people of Luxembourg appear to have given a solid mandate to the CSV and the early indications are that the CSV and the DP are working together to form a coalition which will result in a more pro-business coalition which is motivated to create a smaller, harder working, more efficient, lower cost government which reduces and simplifies bureaucratic processes and is more user-friendly to individuals and companies. We fully support these objectives and wish this new government all success and a long life of service to the nation, the people and the resident companies.
Chairman and CEO