Economy & Politics

The State must fuel with a quarter of taxes less

After an already worrying drop in the first quarter, tax revenues fell 25% from March to June. A collapse due in particular to taxes paid less by companies but also to the lack of revenue from sales of fuel or tobacco.

After an already worrying drop in the first quarter, tax revenues fell 25% from March to June. A collapse due in particular to taxes paid less by companies but also to the lack of revenue from sales of fuel or tobacco.

(MF) – The coronavirus will weigh heavily on the State’s budgetary situation, which directly depends on the overall economic situation and the good health of companies. Not only the measures taken by the government inflate the spending of the State which opened wide the taps but “the receipts skid”, summarizes the Statec when drawing up the state of the economy.

As for the 102 municipalities of the country, the state coffers did not fill up as expected. After a loss of revenue of 12.5% ​​during the first quarter (or 1.1 billion less), the taxes collected “fell by a quarter over one year,” notes the National Institute of Statistics.


Bankruptcy Shoes Geox - Belle étoiles - Foto: Pierre Matgé / Luxemburger Wort

The Minister of Finance sees public spending spinning faster than expected when he presents his 2020 budget. But the deficit noted today, in the eyes of Pierre Gramegna “strengthens the economy’s ability to restart”.


But the horizon should become clearer for the Luxembourg tax authorities because the deconfinement and the future collection of deferred taxes “should support the rebound in tax revenue over the second half of the year”, forecasts Statec. Without igniting, he immediately adds that tax revenues will not return to their pre-crisis level this year, or even in 2021.

The first lever involved: the corporate tax which fell drastically in the first half (-680 million euros over one year). A fall that can be explained by three phenomena: the direct consequences linked to covid-19 obviously, a drop already marked at the start of the year compared to 2019 but also the cancellation of quarterly advances and other payment deadlines. So that the State cashed half as much as last year!

Expected decline of 10% of GDP

The restrictions on cross-border travel throughout the confinement also had a very negative effect on the state coffers. Excise revenue suffered from the drop in sales of fuels and tobacco in particular. Although receipts from excise duties and VAT had still jumped 4% in the first quarter, Statec calculated that they collapsed by more than 35% in the second. A shortfall which still amounts to 450 million euros.


(from left to right) François Bausch, Deputy Prime Minister

In addition to the direct aid measures to sectors in difficulty, the government presented on Wednesday a set of measures intended to revive the economy by strengthening or creating financial aid, in particular for households. Aid geared towards “sustainability”.


But there is a ray of sunshine to the picture: taxes on household income have continued to rise, unlike all other categories of taxes. Including in the second trimester. So that over one year, the State had all the same collected 80 million euros more, at the end of June. The loss of income during the crisis was clearly reduced by the partial unemployment measures.

On the other hand, Luxembourg is no exception to the trend that has emerged throughout the euro zone, household consumption expenditure fell by 5% over one quarter. The recovery in confidence observed after April will not prevent the GDP “from registering a decline of at least 10% in the second quarter”, estimates Statec. It was during this period that the constraints of confinement were more marked.


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