The 2027 budget is setting the country up for a record level of public debt

Finance Minister Gilles Roth presented Luxembourg’s draft national budget for 2027 to the Chamber of Deputies, drawn up under the motto ‘For the people, for recovery’. Amid economic uncertainty, the government has prioritised support for households, stimulating business activity and large-scale capital investment, the total value of which will reach 4.5 billion euros. However, a major tax reform and a new agreement on civil servants’ pay are still at the drafting stage and have not been included in next year’s financial plan.

The social section of the document allocates 212 million euros to fund the previously agreed 200-euro increase in the minimum wage, as well as tax relief for property buyers and public investment in the housing sector. At the same time, funding for the purchase of off-plan property (VEFA) is being increased, whilst temporary measures to cap energy prices will come to an end at the end of the year. A further €152 million is being allocated to increase child benefits and €119 million to reform the Chèque Service Accueil childcare scheme.

In the interests of business, corporate income tax rates are being reduced from 1 January: from 16 per cent to 15 per cent for large companies and from 14 per cent to 13 per cent for small businesses. The tax bonus for investments in digital and energy transformation projects is being increased from 18 per cent to 21 per cent. In addition, the government is modernising the tax regime for expats, expanding the profit-sharing scheme for employees and abolishing the 17-year limit on the carry-forward of tax losses. To facilitate the transfer of family businesses, direct gifts within families will be exempt from tax, whilst to prevent speculation, the minimum holding period for shares to qualify for capital gains tax exemption will be extended from six to twelve months.

The state’s military expenditure will increase by 116 million euros to reach 1.27 billion euros. Significant funds are also being channelled into transport infrastructure: €825 million has been allocated to the Railway Fund and €532 million to the Road Fund. Although the central government deficit is forecast at around 1.9 billion euros, surpluses in the social security funds and local authorities will keep the overall public sector deficit within 570 million euros. By the end of the year, Luxembourg’s public debt will reach 29.3 per cent of GDP; however, the Ministry of Finance emphasises that the situation is fully under control. MP Carole Hartmann has been appointed as rapporteur for the budget bill, and the final vote in parliament is scheduled for the end of the year.