Luxembourg Eyes Further Fiscal Consolidation In 2014
30 April 2013
Posted by: Author: Ulrika Lomas
Source: Ulrika Lomas (Tax-News.com, Brussels)
Luxembourg's Finance Minister Luc Frieden and Economy Minister Etienne Schneider have unveiled details of the country's 2013-2016 stability program and national reform program, highlighting the fact that further fiscal consolidation measures will need to be implemented after the upcoming legislative elections in May 2014.
According to the Luxembourg Finance Ministry, the latest stability update was drawn up in a "difficult macroeconomic context." The crisis has reduced by half the potential for economic growth in Luxembourg, the Ministry points out.
Although Luxembourg will meet its fiscal targets in 2013 and 2014, thanks notably to the adoption of a EUR950m (USD1.2bn) fiscal consolidation package, the country is expected to miss its medium-term objective in 2015. Changes to the tax regime applicable to electronic commerce will lead to a shortfall of value-added tax (VAT) revenues from 2015. This shortfall will be compensated only in part by a planned rise in VAT in 2015.
Following the May 2014 elections, the next Government will therefore need to outline additional fiscal consolidation measures, to ensure that Luxembourg swiftly returns to its medium-term objective in either 2016 or 2017, the Ministry makes clear.
Luxembourg's Finance Minister Frieden also presented details of the country's public finance situation for the first three months of the year. At the end of March 2013, state revenues were up EUR289.4m (+10.6%) compared to the same period in 2012. For the first quarter of 2013, state expenditure and revenues are broadly in line with the 2013 budget forecast.