Transparency of tax policy in Luxembourg is in question

Luxembourg's Minister of Finance, Gilles Roth, responded to a parliamentary enquiry on the country's role in the fight against tax optimisation and the latest recommendations of the European Commission. The discussion centres on the compliance of national standards with international obligations and the introduction of the "Second Pillar" of taxation.

The European Commission regularly expresses concern about the aggressive tax practices of some countries, including Luxembourg. In November 2024, the Commission endorsed Luxembourg's structural budget plan, but stressed the need for increased scrutiny of company tax payments to avoid tax minimisation schemes through "low tax" jurisdictions.

In response to these challenges, Luxembourg has already introduced measures in 2021 to disallow a tax deduction for interest and royalty payments to EU blacklisted countries. This is done to prevent income from being diverted from taxation.

One of the key reforms was the implementation of the law of 22 December 2023, which introduces a global minimum corporate tax for large multinational companies with annual revenues above €750 million. The measure aims to implement the 2022 EU directive and incorporates technical recommendations from the OECD, which, according to the minister, will close loopholes for aggressive tax optimisation.

Mr Roth stressed that Luxembourg is in constant contact with the European Commission to reaffirm its commitment to international tax standards. Despite the criticism, the authorities believe that the measures taken are compliant, as recognised also in the latest commission reports.