International Taxation and Luxembourg’s Economy
IMF Working Papers, November 25, 2020
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- International Taxation and Luxembourg’s Economy
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Bibliographic details
- Authors: Ruud A. de Mooij, Dinar Prihardini, Emil Stavrev
- Published: November 25, 2020
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513560922.001
Summary findings
- 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.
- These multinational-linked companies generate around 3 percent of GDP in tax revenue.
- They create almost 4500 direct jobs.
- They 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; the paper attempts to quantify those risks.
- The paper discusses options for reforms in Luxembourg’s tax system that could help offset adverse revenue and economic effects.
Key statistics and publication metadata
- Authors: Ruud A. de Mooij, Dinar Prihardini, Emil Stavrev
- Publication date: November 25, 2020
- Series: Working Paper No. 2020/264
- Pages: 36
- Issue: 264
- DOI: https://doi.org/10.5089/9781513560922.001
- ISBN: 9781513560922
- ISSN: 1018-5941
- Subject keywords: Asset and liability management; Corporate income tax; Environmental taxes; Income; National accounts; Revenue administration; Special purpose vehicle; Taxes
- Additional keywords: CbCR datum; climate change commitment; Corporate income tax; energy efficiency target; Environmental taxes; Europe; Foreign Direct Investment; Global; Income; International Tax; Luxembourg; Luxembourg driver; Luxembourg economy; Luxembourg government; Luxembourg headquartered MNEs; Luxembourg MNEs; property tax; Special Purpose Entities; Special purpose vehicle; tax system; WP
Risks quantified
- The paper identifies that ongoing international corporate tax framework changes could reduce:
- tax revenue contributions equivalent to around 3 percent of GDP (current contribution level);
- employment supported directly by these entities (currently almost 4500 direct jobs);
- spending on salaries and purchases of business services (currently almost 3 percent of GDP).
- The analysis aims to quantify adverse revenue and economic effects arising from those international tax changes.
Policy options and reform directions discussed
- Options for reforms in Luxembourg’s tax system intended to:
- help offset adverse revenue effects from international tax framework changes;
- mitigate negative economic impacts on jobs and domestic demand through wages and business services spending.
- The paper discusses design considerations for reforms while taking into account Luxembourg’s large overall balance sheets of multinational-linked companies and the modest direct contribution of these companies to the domestic economy.
International Taxation and Luxembourg’s Economy, IMF Working Paper No. 2020/264, Ruud A. de Mooij; Dinar Prihardini; Emil Stavrev; November 25, 2020.
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- Working Paper