Luxembourg Premier Outlines Tax Reform, Underlines Commitment To Banking Secrecy

by Ulrika Lomas, Tax-news.com, Brussels

21 May 2001

At the beginning of the month, Luxembourg Prime Minister Jean-Claude Juncker delivered his "State of the Nation" address, in which he announced details of the second phase of his tax reform package, and reiterated Luxembourg's opposition to any attempt to interfere with the banking secrecy laws of the country.

The first phase of tax reform began on January 1 2001, and according to Mr Juncker, the preparatory work for the second phase has just been completed, which will come into effect next year. The notable feature, said Mr Juncker, is that income tax reform will go much further than had originally been planned. For instance, the lowest tax bracket will now be 8 per cent rather than the previously announced 10 per cent. The minimum level of income before tax is applied will rise to LUF 393,314 for single people and LUF 786,628 for married couples. Rates of tax in Luxembourg are progressive, but under the new reforms, the top marginal rate will be 38 per cent.

Mr Juncker used his State of the Nation speech to draw attention to the pressure faced by Luxembourg from the rest of Europe over the taxation of savings. So far both Luxembourg and Austria have refused to move swiftly to an exchange of information among tax authorities to crack down on tax evasion, and if Mr Juncker's speech is anything to go by, it looks like Luxembourg is not prepared to budge on the issue.

Mr Juncker said: 'In respect of the decisions made at Feira and Brussels, the Luxembourg government will continue to refute the idea that countries must be included in a global solution.' However, he added that the Luxembourg government would not tolerate any financial institution which undermined the reputation of Luxembourg as a financial centre by participating in criminal activity.

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