The tax pressure in Luxembourg is one of the highest in Europe: what does this mean?

The image of a “tax haven” conveyed by Luxembourg seems to be fading more and more over the years. This is demonstrated by the latest data from Eurostat, published on October 31: these show that the Grand Duchy has one of the highest tax pressures in the European Union, according to pooled data. for the whole of 2023.

According to the definition given by the OECD (Organization for Economic Cooperation and Development), “tax pressure corresponds to the total amount of tax revenue collected, expressed as a percentage of GDP. This indicator relates to the administration as a whole (all levels of administration) and is measured in millions of USD and as a percentage of GDP.

According to Eurostat, this overall ratio between the amount of social contribution revenue compared to Luxembourg’s GDP amounts to 42.8%, making it the fifth highest percentage in the European Union. In the ranking, the Grand Duchy is preceded by Austria (43.5%), Denmark (44.1%), Belgium (44.8%) and France (45.6%). The average for European Union countries is 40%.

One of the largest increases in the entire EU

Compared to 2022, the data shows that Luxembourg’s ratio experienced one of the highest increases over a year: it was 40.2%, which means that it suffered an increase of 2. 6 points in one year.

While the ratio is increasing in 11 European Union countries, the increase in Luxembourg is the second highest, behind Cyprus (+2.9%).

Luxembourg stands out with one of the largest shares of its GDP coming from income and wealth taxes, with 18% of the country’s total GDP. Only Denmark supplants the Grand Duchy, with 29.5% of its GDP coming from these revenues.

Finally, concretely, the share of tax revenue in the European Union amounted in 2023 to 6,883 billion euros (6 trillion and 883 billion), including a little less than 34 billion euros coming from Luxembourg.