The International Monetary Fund (IMF) has held consultations with Luxembourg under Article IV of its articles of agreement and issued a press release on 13 May 2015. Economic growth in Luxembourg was close to 3% in 2014 partly owing to buoyant exports of financial services and growth is estimated to be 2.5% in 2015.
Luxembourg’s main challenge is to strengthen the current economic model as it will be challenged by the changes to international financial regulations and the current international tax initiatives. Fiscal and structural reforms are needed to diversify the economy.
The current budget and medium term planning deal appropriately with the falling revenues resulting from changes to the value added tax rules for e-commerce. The IMF supports the goal of maintaining budget surpluses in the medium term but advises that reform is require to ensure that the pension system is appropriate for an aging population.
The IMF welcomed the participation by Luxembourg in tax initiatives by the European Union and by the OECD /G20 in respect of tax transparency. Luxembourg must assess the impact of any erosion of the tax base resulting from international tax changes and must work on options for diversifying the sources of government revenue.
