IMF Working Papers

International Taxation and Luxembourg’s Economy

By Ruud A. de Mooij, Dinar Prihardini, Antje Pflugbeil, Emil Stavrev

November 25, 2020

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Ruud A. de Mooij, Dinar Prihardini, Antje Pflugbeil, and Emil Stavrev. International Taxation and Luxembourg’s Economy, (USA: International Monetary Fund, 2020) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Luxembourg receives ample investment from multinational corporations, in part due to some attractive features in its international tax rules. Around 95 percent of these foreign investments pass through Luxembourg via companies performing holding and/or intra-group financing activities. While their contribution to Luxembourg’s economy is modest relative to their large overall balance sheets, they still generate around 3 percent of GDP in tax revenue, create almost 4500 direct jobs, and spend almost 3 percent of GDP on salaries and purchases of business services. Ongoing changes in the international corporate tax framework pose risks to these economic contributions, which this paper attempts to quantify. It also discusses options for reforms in Luxembourg’s tax system that could help offset adverse revenue and economic effects.

Subject: Asset and liability management, Corporate income tax, Environmental taxes, Income, National accounts, Revenue administration, Special purpose vehicle, Taxes

Keywords: CbCR datum, Climate change commitment, Corporate income tax, Energy efficiency target, Environmental taxes, Europe, Foreign Direct Investment, Global, Income, International Tax, Luxembourg, Luxembourg driver, Luxembourg economy, Luxembourg government, Luxembourg headquartered MNEs, Luxembourg MNEs, Property tax, Special Purpose Entities, Special Purpose Entities., Special purpose vehicle, Tax system, WP

Publication Details

  • Pages:

    36

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2020/264

  • Stock No:

    WPIEA2020264

  • ISBN:

    9781513560922

  • ISSN:

    1018-5941

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