Pia Oppel, journalist at public radio 100,7, has investigated whether this means the project is shelved and why this U-turn came about.
On Tuesday 24 October, Oppel presented a radio programme on the issue. The DP finance minister Pierre Gramegna had announced in June that he would propose measures to stop the misuse of stock options because they are not justified. Gramegna had said in an interview with 100,7 in June:
“This government stands for transparency and will enforce that in this domain as well. Anything to do with taxes must be laid down in law.”
Background
The measure was introduced in 2002 by the opposition CSV to attract high income earners and bind them to their company. These high-income earners can choose to have some part of their income paid in stock options, with a significantly lower tax rate (12-13%) than that on their income (42% highest tax rate).
Currently, this regime is regulated by “circulaire”, even though the constitution stipulates that all matters related to taxation privileges must be written down in law.
Watered down proposal in budget speech
In his budget speech, Gramegna announced he would raise the tax rate of stock options from 13% to 21%, and that “the system would become fairer and more coherent.”
The finance ministry replied to inquiries that they would first collect more data on the issue before changing the regime, and would not comment if any draft law would be submitted to parliament before the 2018 elections.
However, since January 2016, companies have provided lists of their beneficiaries and amounts of these stock options. In March 2017, the ministry said that the loss on tax revenues was estimated at between €150m and €180m per year.
Letter from UEL chair Wurth
The Lëtzebuerger Land revealed on Friday 20 October that the chair of the UEL business association had sent a letter to the finance minister, in which he pleaded to keep the regime “as attractive as possible.” He added that “we consider that these proposed changes should not necessarily be laid down in a law. A legislative debate takes time and provokes certain reassessments, while economic actors ask to be reassured.”
Michel Wurth told 100,7 that:
“If the regime is abolished, whole domains of companies would move abroad because Luxembourg would not be competitive anymore. We plead for security of planning.”
Coalition disagreements
The DP-LSAP-Green coalition has trouble showing a united front on Gramegna’s change of heart.
The head of the Green parliamentary group Viviane Loschetter said that they wanted the results of the 2-year review because:
“we think that the system must be abolished in the long term. If not, it should at least be reformed. That can only be done by law, and we want to know the timeline on this from the finance minister.”
Alex Bodry, the head of the LSAP parliamentary group, warned that Luxembourg should not “leave the path of virtue”. It was illogical to raise income tax for the highest earners if they don’t get paid that way. However, he conceded that, to get a quick change, a “circulaire” was appropriate.
Toeing the party line was Eugène Berger (DP): “it is a question of pragmatism and realism.” He argued that everyone in the coalition wants to introduce a draft law, but that “we needed to do something now, and the only possible way to be quick was by circulaire.”
CSV reaction
Claude Wiseler of the CSV said that a more restrictive law was needed, and the circulaire did not solve the problem. “The finance minister should implement what he announced a few months ago,” Wiseler demanded.
On Wurth’s letter and demand to leave parliament out of it, the CSV lead candidate said: “it is clear that we deal with a matter where a legal basis should be created, and that discussion must be public--it’s normal. I cannot share his opinion.”