State finances are back in the black

Finance minister Pierre Gramegna, pictured, is increasingly optimistic about the state's finances. Sébastian Goossens/archives

Finance minister Pierre Gramegna, pictured, is increasingly optimistic about the state's finances. Sébastian Goossens/archives

Three months into 2021, Luxembourg’s finance minister notes that state finances are back in the black.

“After noting a slight decline in the deficit from February 2020 to February 2021, I am delighted today that the central government balance is now turning green with a surplus of €56m as on 31 March 2021, €434m more than the balance observed as on 31 March 2020,” finance minister Pierre Gramegna (DP) said on Monday.

Presenting the state's financial situation for the first quarter to the members of parliament on the finance and budget committee and the committee for the control of budget execution, he confirmed the optimistic note that had already been observed at the end of the first two months of the year.

After three months, public revenues were up by 9.5% with a total collection of €5.4bn.

The taxes collected by Luxembourg Inland Revenue amounted to €2.728bn at the end of March 2021, an increase of 7.6% compared to the first three months of 2020. This positive evolution is mainly due to the tax on wages and salaries.

The Registration Duties, Estates and VAT Authority also saw an increase in its revenues of 14.2% (€1.656bn), an increase mainly supported by VAT revenues and, at a lower level, by the subscription tax linked to investment funds and registration fees.

Only the revenue of the Customs and Excise Agency was down by 4% (€403.2m). The minister of finance credits this situation to teleworking and the CO2 tax on fuels, both of which have reduced traffic at Luxembourg's service stations.

Expenditures stagnate

Central government expenditure was only up by 0.6% over three months compared to the January-March period in 2020. It currently stands at €5.3bn.

A limited increase, therefore, despite social benefits which have seen an increase of €57m or (11.9%) over three months, driven in particular by partial unemployment for employees in the sectors most affected by the pandemic.

Direct and indirect public investments also increased by €42.7m, or +13.4% compared to the end of March 2020, a choice intended to boost the national economy.

This article was originally published in French on Paperjam.lu. It has been translated and edited for Delano.