Taxes, unemployment, teleworking, transport… Luxembourg’s 223,000 cross-border workers are under attack from all sides and are seeing their situation become more complicated day by day. So much so that the attractiveness of Luxembourg could suffer. Explanations.
They are often considered privilegedboth in Luxembourg and in their country of residence. But the situation of border workers is less and less rosy. Between the many hours spent in transport (3 hours per day on average), the tax bludgeoning which may amount to disguised double taxation, unequal treatment on teleworkingtaxation on overtime and more recently reduction of unemployment compensation cross-border workers, they are less and less inclined to come and work in Luxembourg.
For Pascal Peuvrel, President of AFAL, the Association of Border Workers in Luxembourg,we can clearly speak of discrimination. “They have suffered numerous attacks from Luxembourg for years and now we are moving to the side of the States of residence“.
Significant drop in unemployment benefits
The latest concerns France, which wants to change the compensation system for cross-border beneficiaries. European rules provide that cross-border workers contribute in the country of employment but receive compensation calculated on the basis of their salaries, which are often higher than in France, particularly for those who have worked in Switzerland and Luxembourg.
Issue : this represents an additional cost of around 800 million euros per year for unemployment insurance in France according to Unédic. Switzerland is the country that costs France the most, but Luxembourg still represents 22% of these expenses.
The government has therefore asked the social partners to find savings on unemployment compensation for cross-border workers. And some French unions have signed an agreement which provides for a reduction in unemployment among French cross-border workers which could fall by a third.
Clear discrimination
The agreement could apply from 2025 and was immediately described as discriminatory by border workers’ associations who are ready to go to court.
For Lucas Grandjean, Substitute Deputy for Moselle: “This measure respects neither our principles nor previous court decisions“.
He explains that “savings cannot be made to the detriment of 77,000 people who worked in a border country and are now unemployed. The latter would bear nearly 60% of the savings made even though they represent only 0.3% of the unemployed in France.“.
Taxes: an increase in sight
The other bad news concerns taxes. As bitterly noted by Georges Gondon, President of the ASBL Frontaliers Luxembourg, “Each State creates more and more mechanisms that allow it to capture the maximum amount of money“. Whether it is Luxembourg, Germany, Belgium or France, the tax services do not lack imagination when it comes to picking the pockets of cross-border workers.
The proof is with a new tax increase looming for French cross-border workers who have mixed income, that is to say on both sides of the border. The Franco-Luxembourg tax convention signed in 2018 provided for a change in the method of calculating tax in France. A development announced as having no impact for taxpayers, but the consequences were immediately felt for the cross-border workers concerned with increases reaching several hundred or even thousands of euros on their 2020 income.
They were finally saved by a tolerance decided at the last minute by the Ministry of the Economy. After opting for a temporary solution for four years, France finally applies a new calculation method in 2025 on this year’s income.
The taxpayers concerned will therefore see their taxes increase significantly. For Séverine Bergé, director of the accounting and tax firm Néofisc, “we can speak of a disguised double taxation. And it’s unfair because the tax rate is not based on the income actually received, but in both countries, it will be based on tax-inclusive income. So you have a higher rate than it should in both countries, and the taxes are higher“.
For German cross-border workers, it is overtime, exempt in Luxembourg, which is taxed in their country of residence.
Teleworking: the other discrimination
When it comes to teleworking, there is no equality between residents and cross-border workers either. Luxembourgers can work from home up to 100% of their working time without impact on their tax or social security system if their employer allows it. Cross-border workers are limited to 34 daysper year, this is the tax threshold.
If their employer is in compliance with their country of residence and they can overcome the tax threshold, they must also pay attention to the social threshold. In fact, if they telework more than 112 days per year, they switch to social security in their country of residence. And this can have very significant consequences on their retirement or on the aid they receive from the State.
Finally, Belgian cross-border workers have a problem with on-call hours which their country considers to be teleworking.
The road: hell!
And what about transport! The train line on the Lorraine line is saturated every day, and The “RER Metz-Luxembourg” project may well be on track, but it is not happening right away. And on the road it’s not any better.
While the A3 widening work is expected to last 10 years, cross-border residents know that they are not finished with the construction sites since the A31 bis project is due to follow. A highway which, moreover, will no longer be free and which even if paid should remain congested.
In short, the outlook is far from bright for cross-border workers, and More and more of them are throwing in the towel. Signs of a slowdown in cross-border work are being felt, with in particular a drop in the number of commuters from Belgium and Germany.
Or the Luxembourg economic model needs its cross-border workers. The drying up of the cross-border workforce would be a catastrophe for Luxembourg. But also for neighboring countries because the salaries of cross-border workers support the economy of several French, Belgian and German regions.
