1.9.2023
EN
Official Journal of the European Union
C 312/151
(25)
Assuming unchanged policies, the Commission’s 2023 spring forecast projects net nationally financed primary expenditure to grow at 2,9 % in 2024, which is below the recommended growth rate.
(26)
According to the 2023 Stability Programme, government investment is expected to remain stable at 4,5 % of GDP in 2023 and 2024.
The 2023 Stability Programme refers to reforms and investments, that are expected to contribute to sustainable and inclusive growth.
Those reforms and investments include investments to foster the energy and digital transitions, which are also part of the recovery and resilience plan.
(27)
The 2023 Stability Programme outlines a medium-term fiscal path until 2027.
According to the 2023 Stability Programme, the general government deficit is expected to gradually decline to 1,0 % of GDP in 2025 and to 0,8 % by 2026, before slightly increasing to 0,9 % in 2027.
Therefore, the general government deficit is planned to remain below 3 % of GDP over the Programme horizon.
According to the 2023 Stability Programme, the general government debt-to-GDP ratio is expected to increase from 27,5 % at the end of 2024 to 29,0 % by the end of 2027.
(28)
The impact of demographic trends on government spending will become more acute in the coming decades, as the number of pensioners per worker is expected to rise steadily due to the ageing population and the slowdown in net migration flows.
In a scenario where there is no policy change, Luxembourg will face one of the Union’s sharpest increases in pension spending as a share of GDP, which is projected to double to around 18 % of GDP by 2070, the highest in the Union.
This will lead to a significant increase in government debt, putting the sustainability of government finances at risk.
The recovery and resilience plan does not address the long-term sustainability of the pension system.
Specifically, that plan does not address the negative effects of early retirement schemes and financial incentives to leave the labour market early, which contribute to the low rate of employment among older workers.
Raising the effective retirement age would have a beneficial macro­ economic impact and the potential to reduce spending on pensions, since a higher rate of older workers in employment would support economic growth.
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 international financial sector, which to a significant extent explains the large financial flows.
However, those flows also reflect the presence of many foreign-owned companies in the country, which are involved in intra-group treasury activities.
A particular point of concern is the absence of withholding taxes, or equivalent measures on interest and royalty payments made to low or zero-tax jurisdictions beyond those countries included in the Union list of non-cooperative jurisdictions (19).
Outbound payments of interest and royalties from Luxembourg-based companies to thirdcountry 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.
However, so far these measures have been insufficient to address those features of the tax system, which can be used by multinationals to engage in aggressive tax planning.
(29)
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 to be implemented by 2026.
The implementation of Luxembourg’s recovery and resilience plan is underway.
Luxembourg submitted its first payment request on 28 December 2022, corresponding to 26 mile­ stones and targets in the Council Implementing Decision, for the disbursement of EUR 20 million under the Facility.
The Commission published its positive preliminary assessment on 28 April 2023.
The Council is discussing the payment request.
The milestones and targets concerned include the entry into force of the ‘Housing Pact 2.0’ reform, aimed at increasing the supply of affordable rental housing offered by municipalities, investments for the digitalisation of the public sector and for the development of ultra-secure communication, the upskilling of the workforce with the launch of the ‘FutureSkills’ programme, as well as a reform on
(19) Council Conclusions on the revised EU list of non-cooperative jurisdictions for tax purposes (OJ C 64, 21.2.2023, p. 17).