1.9.2022
EN
Official Journal of the European Union
C 334/133
(20)
The fight against aggressive tax planning in the Union is essential to: (i) prevent distortion of competition between firms; (ii) ensure fair treatment of taxpayers; and (iii) safeguard government finances.
Luxembourg is a small, open economy, with a large integrated financial sector, which in large part explains the existence of large financial flows.
However, these large financial flows also reflect the large presence in the country of foreign-controlled companies, which are involved in intra-group financing and treasury activities.
A particular point of concern is the absence of withholding taxes or equivalent measures on interest and royalty payments to low- or zero-tax jurisdictions beyond those countries included in the Union list of non-cooperative jurisdictions (18).
Outbound payments of interests and royalties from Luxembourg-based companies to non-EU jurisdictions could be subject to little or no taxation if these payments are not taxed or taxed at a low level in the recipient jurisdiction.
Luxembourg has taken some steps to fight aggressive tax planning.
So far, however, measures have been limited and insufficient to address the outbound payment issue in the tax system, which could be used by multinationals to engage in aggressive tax planning.
(21)
In accordance with Article 19(3), point (b), of Regulation (EU) 2021/241 and criterion 2.2 of Annex V to that Regulation, the recovery and resilience plan includes an extensive set of mutually reinforcing reforms and investments with an indicative timetable for implementation to be completed by 31 August 2026.
These help address all or a significant subset of the economic and social challenges outlined in the country-specific recom­ mendations addressed to Luxembourg by the Council in the European Semester in 2019 and 2020, in addition to any country-specific recommendations issued up to the date of adoption of a recovery and resilience plan.
In particular, these challenges relate to the health system’s resilience, labour market inclusion and investment in the green and digital transitions, as well as the shortage of affordable housing and the institutional resilience of the anti-money laundering framework.
The recovery and resilience plan includes measures to increase the public supply of affordable housing.
The recovery and resilience plan also includes investments in renewable energy generation and sustainable transport, helping to progressively decarbonise the economy.
Digital public services and a large public research and innovation project in quantum communication technologies would encourage business investment and boost productivity growth in the medium term.
On anti-money laundering and counter-terrorist financing, the recovery and resilience plan includes a combination of measures to improve transparency and strengthen the framework for the oversight of financial service providers.
The skills strategy and training programmes set out in the recovery and resilience plan, including a dedicated target for older workers, should help improve labour market inclusion.
(22)
The implementation of the recovery and resilience plan of Luxembourg is expected to contribute to making further progress on the green and digital transitions.
Measures supporting the climate objectives in Luxembourg account for 61 % of the recovery and resilience plan’s total allocation, while measures supporting digital objectives account for 32 % of the recovery and resilience plan’s total allocation.
The fully fledged implementation of the recovery and resilience plan, in line with the relevant milestones and targets, will help Luxembourg swiftly recover from the fallout of the COVID-19 crisis, while strengthening its resilience.
The systematic involvement of social partners and other relevant stakeholders remains important for the successful implementation of the recovery and resilience plan, as well as other economic and employment policies going beyond the recovery and resilience plan, to ensure broad ownership of the overall policy agenda.
(23)
Luxembourg has not yet submitted the Partnership Agreement or the other cohesion policy programmes provided for in Regulation (EU) 2021/1060 of the European Parliament and of the Council (19).
In line with Regulation (EU) 2021/1060, Luxembourg is to take into account the relevant country-specific recommendations in the programming of the 2021–2027 cohesion policy funds.
This is a prerequisite for improving the effectiveness and maximising the added value of the financial support to be received from cohesion policy funds, while promoting coordination, complementarity and coherence between those cohesion policy funds and other Union instruments and funds.
The successful implementation of the Recovery and Resilience Facility and cohesion policy programmes also depends on the removal of bottlenecks to investment to support the green and digital transitions and balanced territorial development.
(18) Council Conclusions of 24 February 2022 on the revised EU list of non-cooperative jurisdictions for tax purposes (OJ C 103, 3.2.2022, p. 1).
(19) Regulation (EU) 2021/1060 of the European Parliament and of the Council of 24 June 2021 laying down common provisions on the European Regional Development Fund, the European Social Fund Plus, the Cohesion Fund, the Just Transition Fund and the European Maritime, Fisheries and Aquaculture Fund and financial rules for those and for the Asylum, Migration and Integration Fund, the Internal Security Fund and the Instrument for Financial Support for Border Management and Visa Policy (OJ L 231, 30.6.2021, p. 159).