Luxembourg Government Faces €630 Million Budget Deficit in 2023
Luxembourg - January 23, 2024
Luxembourg's government revenue witnessed a nearly 7% increase in 2023; however, the accompanying surge in expenditures, as disclosed by the Minister of Finance, has resulted in a significant budget deficit of €630 million.
The latest financial figures for the fiscal year ending on December 31 have been released, revealing a fiscal shortfall that needs to be addressed in an extended period labeled as "additional," lasting until April 2024. It is evident that this deficit will ultimately exceed the current year's budget, adding further strain to Luxembourg's fiscal outlook.
The rise in expenditures is primarily attributed to threefold actions, the energy crisis, inflation, and the ongoing challenges posed by the COVID-19 pandemic. The Finance Minister cautions that, albeit "unpopular," intelligent measures must be taken to ensure that the gap between income and expenditure does not widen further.
Notably, the discussion on tax increases is not on the table. With the change in government, the budget proposal for 2024 is expected to be presented by the end of March. The crisis in the construction sector is anticipated to worsen, prompting a series of measures to be implemented in the coming weeks. The Finance Minister believes that a "significant drop in revenues related to real estate transactions clearly indicates the need for sustained action." He proposes "bold decisions to revitalize the housing construction sector and consequently prevent a substantial increase in business bankruptcies and unemployment."
On the flip side, corporate incomes are thriving. Society's income tax contributed €313.3 million, and wealth tax amounted to €222.3 million, showcasing an increase compared to 2022.
Personal income tax revenues exceeded the budget by 119.3%, while revenues from wage and salary taxes reached 98.9% of the budget allocation. The government now faces the critical challenge of balancing its budget amid economic uncertainties and external pressures.