The assessment of current negotiations on the formation of a new Government of Luxembourg is that there is a pledge to redressing the public finances if necessary with recourse to tax measures.
However Luxembourg is starting from a favorable financial position in 2013 without a change in policy, the public finances are set to deteriorate from the year 2014. The state’s finances are to be the heavily impacted by changes to place of supply rules at European Union (EU) level from 2015. This is expected to lead to a decline in value added tax (VAT) revenues, from about Euro 1bn in 2014, to Euro 338m in 2015.
Currently where the supplier is situated within the area of European Union and the customer is a non taxable person; the supply is under tax where the supplier is established. Luxembourg had secured business from ticket operators and related businesses because of its offering of the reduced VAT rates in the EU. It has been recommended that an increase to Luxembourg’s headline VAT rate, at present 15 %, should be considered in order to offset the Euro 700m decline in annual value added tax (VAT) revenue.
