In March 2022, the government and social partners of Luxembourg met and reached an agreement which aimed at mitigating the negative impact of the energy crisis on both the economy and households. Because of the market’s volatility, this agreement already planned that a new meeting of the Tripartite Coordination Committee would take place if the economy and social situation in the country deteriorated.
As this deterioration became reality later the same year, another meeting between the same parties took place in September 2022 to further shelter the Luxembourg household’s purchasing power and the companies’ competitiveness. A provision in this second agreement explicitly stated that in the event that the removal of the measures agreed upon in Solidaritéits Pak 2.0 would lead to an inflationary shock in 2024, a new meeting between the government and social partners would be organized in order to consider the best way to exit the measures. Since STATEC’s previsions for 2024 indicated that the risk of inflation was acute, a third meeting of the Tripartite Coordination Committee naturally took place in March 2023, and lead to a third agreement (hereinafter, the “Agreement”) with a complete new set of measures which should help to keep the inflation at 2,8% in 2023, whilst STATEC’s forecast is currently close to 4,8% of inflation. These measures can be divided into the three following categories: social measures (1), tax measures (2), and other measures (3).
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Social measures
Firstly, companies will receive compensation for the indexation payment due in the third quarter of this year until the end of January 2024 highlighting the State’s desire to help businesses by shouldering part of the burden following from the automatic adjustment of wages to the inflation as promised during the negotiations of the Solidaritéits Pak 2.0. This measure will be implemented through the adjustment of the contribution rate to the mutuality of employers in 2024. Secondly, the automatic sliding scale of wages will be maintained.
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Tax measures
A key element of the Agreement, which was of the outmost importance for labour unions, is to adjust the tax brackets so as to ensure that a maximum of the index «actually lands in the people’s pockets». This lead the government to agree to adjust said tax brackets by 2,5 indexation points (6,5%) from 2024 on. In 2023, it has been agreed that a tax credit will apply retroactively from the 1 January 2023 to compensate for all the taxes that have been paid on the two indexation payments.
Also, the pre-existing tax credit for registration and transcription fees (also known as the « Bëllegen Akt ») will be raised from EUR 20,000 to EUR 30,000 per person for the year 2023. Furthermore, the deductible amount for mortage loans is increased from EUR 2,000 to EUR 3,000 per person. In addition, the tax break for proprietors taking part in the house aid scheme is risen from 50% to 75% of the rent.
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Other measures
A lot of the measures that were created by the Solidaritéits Pak 2.0 to reduce and limit inflation will be extended until the end of 2024. This concerns the increase of gas price capped at 15% for consumers whose maximum gas flow is 65m3 per hour, the freezing of electricity prices for consumers whose annual consumption is under 25,000 kilowatt hour, the EUR 0,15 reduction per liter on the price of heating oil and the bonus of EUR 200 to EUR 400 for eligible low income households (allocation vie chère). In addition, the tax credit for low-income households which was created in order to help them pay for the CO2 tax will be extended in 2024. Furthermore, the subsidies for the installation of publicly accessible charging station, for liquefied petroleum gas, for the price of wooden pellets and for the price of fuelled diesel are also maintained.
Not only the aid scheme designed to offset part of the additional costs linked to the rise in electricity prices for companies qualified as large energy consumers is renewed, but the State will also contribute to the increasing energy costs for accommodation structures.
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