Luxembourg Confirms Higher VAT Rates For 2015

28.03.2014

Luxembourg's Prime Minister Xavier Bettel has confirmed the Government's decision to increase three of the value-added tax rates by 2 percent from January 1, 2015.

From the beginning of next year, the standard rate of VAT will rise from 15 percent to 17 percent. The 2 percent increase will also apply to the reduced rates of VAT, from 12 % to 14 % and from 6 % to 8 %.

The super reduced rate in relation to basic commodities will remain unchanged at 3 percent. The 3 percent VAT rate will also continue to apply in the country's hotel and catering industry to support jobs.

Prime Minister explained that the VAT increase is forecast to generate additional revenue for the state budget of around 350 millions of euro. He said that the increase is necessary to partially offset the VAT shortfall, expected in the area of e-commerce in the next year.

Xavier Bettel claimed that the Government had taken time to confirm the measure to discuss the impact of the decision on the competitiveness and attractiveness of the economy.

Based on: http://www.gouvernement.lu/3602238/28-partenaires-sociaux

Expert’s opinion

VAT increase will affect companies providing services in Luxembourg.

But another thing is interesting. Simple calculation based on the government's plans to attract 350 million euros and to change rate by only 2% shows the sum of the taxable income of e-commerce industry through Luxembourg companies, namely 17 billion 500 million euros per year. That is approximately equal to 24 billion 150 million dollars.

This is approximately equal the GDP of Estonia 24 284 billion (according to the IMF, 2013.).

So a question arises:

From which sources and in which branch of the Luxembourg capitalist economy is it possible to find a turnover to compensate for one-third of income?

GDP of Luxembourg is 60 538 billion (according to the IMF, 2013).

If it is banking and financial sector, an obligation to fill the budget will be passed on customers of the banks, apparently. 

Yaroslav Lomakin ( Managing partner of Honest & Bright” company)