International Taxation and Luxembourg’s Economy

Author/Editor:

Ruud A. de Mooij ; Dinar Prihardini ; Antje Pflugbeil ; Emil Stavrev

Publication Date:

November 25, 2020

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

Luxembourg receives ample investment from multinational corporations, in part due to some attractive features in its international tax rules. Around 95 percent of these foreign investments pass through Luxembourg via companies performing holding and/or intra-group financing activities. While their contribution to Luxembourg’s economy is modest relative to their large overall balance sheets, they still generate around 3 percent of GDP in tax revenue, create almost 4500 direct jobs, and spend almost 3 percent of GDP on salaries and purchases of business services. Ongoing changes in the international corporate tax framework pose risks to these economic contributions, which this paper attempts to quantify. It also discusses options for reforms in Luxembourg’s tax system that could help offset adverse revenue and economic effects.

Series:

Working Paper No. 2020/264

Subject:

Frequency:

regular

English

Publication Date:

November 25, 2020

ISBN/ISSN:

9781513560922/1018-5941

Stock No:

WPIEA2020264

Format:

Paper

Pages:

36

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