According to the finance ministry, the French tax authorities are responsible for the increased tax burden on some cross-border commuters. Photo: Shutterstock

According to the finance ministry, the French tax authorities are responsible for the increased tax burden on some cross-border commuters. Photo: Shutterstock

The LCGB and experts from the finance ministry have examined the increased tax burden of households with mixed French and Luxembourg incomes following the latest tax treaty between the two countries.

Since the beginning of the month, a number of border households with mixed incomes have noticed a tax increase. The LCGB union approached the finance ministry in order to find out why.

The latest tax treaty between Luxembourg and France was initially blamed for the increase, but the reason went deeper. “After a meeting with experts from the ministry of finance and the direct taxes administration, it emerged that the tax burden of households with mixed French and Luxembourg incomes is not due to the revision of the tax treaty, but to the calculation rules used by the French tax authorities in application of the treaty,” said Christophe Knebeler, deputy secretary general of the LCGB.

Little data on the impact of the tax increase

The case is not yet closed for the union, which now wants to quantify the effects of this purely internal change in the French tax system. “We have asked how many people are affected by this increase and to what extent. But the Luxembourg finance ministry cannot answer this question. We have to turn to the French tax authorities, but we know that it will be difficult to get answers. We are therefore working on the testimonies and concrete cases that have been reported to us,” explained Knebeler.

The trade unionist is especially concerned about the attractiveness of the country for border workers. According to the LCGB, this increase comes on top of a series of issues that make working in Luxembourg less and less attractive. “This is now added to the latest Luxembourg reforms, which have each time aimed at reducing the purchasing power of the border workforce, whether in the case of scholarships, family allowances or the 2017 tax reform, which was introduced on 1 January 2018 and limited access to tax class 2 for married border workers to threshold conditions,” the union went on.

“Obviously, this loss of attractiveness will not happen overnight, but for the past five years there have been more and more measures that are harmful to border workers. They are wondering whether it is still worthwhile to cross the border and are looking at other options, such as going to work in Belgium or Germany. I would remind you that 44% of our economy is made up of cross-border workers. Even a small drop in this percentage could have serious consequences for the country,” warned Knebeler.

If it seems impossible to bend the French tax authorities, the LCGB is asking the government to take measures to protect the economic attractiveness of the country via urgent political measures to ensure that Luxembourg will not be confronted with a labour shortage in essential sectors such as health care, trade, security and transport.

This article in Paperjam. It has been translated and edited for Delano.