Public purse

Kersch stands by “covid tax” to foot pandemic bill

Dan Kersch imagines an additional tax of 5–10% in the event of average profits for 2015–19 being higher than 10% in comparison with 2020–21. Photo: Anthony Dehez / Maison Moderne

Dan Kersch imagines an additional tax of 5–10% in the event of average profits for 2015–19 being higher than 10% in comparison with 2020–21. Photo: Anthony Dehez / Maison Moderne

Deputy prime minister and labour minister Dan Kersch is holding on to the idea of a covid-19 tax--proposing an extra levy of 5–10% on companies that grew their profits in 2020--saying it would prevent the financial burden of the pandemic from being passed to households.

Dan KerschDan Kersch (LSAP) on Tuesday in an interview with RTL said he has not budged from his position. At a party congress in March, the minister had first proposed a tax aimed at the “winners of the crisis”.  With the cost of the pandemic leaving a dent in public finances, he is looking to those who profited from the crisis to help foot the bill.

The tax could be calculated based on the average profit of companies between 2015 to 2019 compared to that of 2020, Kersch said. Should profit growth exceed 10%, the minister said an additional tax of 5–10% could be levied. 

Laboratoires Réunis, for example, tripled its revenue to reach €100.7m in 2020, with profits up from €1.3m to €15.5m. The laboratory won the government contract to run the large-scale testing scheme. Freight airline Cargolux reported a profit of €637m last year, compared to €20m in 2019.

But while these businesses thrived, they also delivered essential services in the fight against the coronavirus that helped the Luxembourg economy withstand the worst of the crisis. 

A tax that divides the coalition

Within the LSAP, Dan Kersch can count on interior minister Taina BofferdingTaina Bofferding, who has spoken out in favour of such a measure, and on Georges EngelGeorges Engel, chair of the LSAP parliamentary group, who would like to make this idea the focus of a discussion on fairer taxation.

On the other hand, economy minister Franz FayotFranz Fayot, also of the LSAP, was more nuanced in an interview with Paperjam. “A distinction must be made between companies that have innovated, that have succeeded in being agile and have done well by respecting the rules, and those that have done so less,” he said.

“The analogy has been made with war profits and the taxation of war profits. But this is a complex, delicate discussion, and I would much prefer to have a more fundamental one on the taxation of large fortunes, and in particular on non-productive capital. For I believe that there is a fundamental distinction between property rents and productive work or productive capital,” Fayot said.

Employers have vigorously rejected the tax and it is also dividing the government coalition. DP president Corinne CahenCorinne Cahen said such a tax is simply not on the agenda.

Djuna BernardDjuna Bernard, co-president of the Greens, said a discussion between the three parties was needed, favouring a solution at the European level by advocating taxing internet giants like Amazon more stringently as winners of the crisis. 

This story was first published in French on Paperjam. It has been translated and edited for Delano.