Luxembourg's reforms: how to make housing more affordable and purchasing power higher
Luxtoday
The Luxembourg government unveiled the "Entlaaschtungs-Pak", an ambitious fiscal package aimed at improving people's purchasing power, reducing the tax burden and supporting businesses. These reforms cover 16 key measures, ranging from tax relief to youth support, and emphasise the country's commitment to maintaining a balance between social justice and economic competitiveness.
From January 2025, tax scales will be adjusted by 2.5 indexation points, making life particularly easier for lone parents and minimum wage workers. Additionally:
- Tax Credit Enhancement: Introduced new overtime exemptions and increased benefits for single-parent families.
- Tax exemption: Minimum wage workers will receive a full tax exemption.
In the area of the country's economic attractiveness, a set of measures has also been outlined, including:
- Reduction of corporate tax: The corporate tax rate will decrease by 1 percentage point, bringing Luxembourg closer to international standards.
- Youth and Talent Support: A new bonus for young professionals and simplified migration procedures for expats make the country attractive to professionals.
- Employee incentives: Improved conditions for employees to participate in companies' profits.
The measures include another aspect related to mortgage lending. According to the announced plans, the pool of cases where mortgage payments can be tax deductible will be expanded. This is a step towards reducing the cost of housing, one of Luxembourg's key social problems.
The consequences of such a measure cannot yet be accurately predicted. On the one hand, it will make mortgage lending in Luxembourg much more attractive, as it will help to reduce the cost of payments to the state. On the other hand, housing prices are still at near-space level and are unlikely to decline quickly.
Total funding for reforms in 2025 will amount to €421 million, and by 2028 this amount will exceed €536 million. The most costly measures:
- Tax Scale Adjustment: €225 million in 2025, up to €300 million annually by 2028.
- Corporate tax reduction: €56 million in 2025, €70 million by 2027-2028.
Objectives and perspectives
"Entlaaschtungs-Pak demonstrates an integrated approach to the development of Luxembourg:
- Enhancing household incomes: Anti-inflation measures will improve living standards.
- Supporting Vulnerable Groups: Single parents and low-income people are the focus.
- Strengthening its position in the global economy: Lower taxes and business support make Luxembourg a magnet for investors and professionals.
These reforms are designed not only to relieve current social tensions, but also to prepare the economy for long-term sustainable growth.
