The OGBL has long called for a reform of Luxembourg’s taxation system, so it is no surprise that the labour union’s president, Nora Back, says this should be one of the next government’s priorities. The outgoing government had promised to make changes, but then had covid and the economic fallout of the Ukraine conflict to deal with, so didn’t get round to legislating the reforms. Now Back wants to see the system overhauled.
There is an unjust distribution of tax burden between those on low or medium salaries and high earners
Firstly, the union is demanding an automatic adjustment of tax in line with inflation, so that net income is not hit whenever there is an indexed increase in gross salaries. Tax reform should also tackle the inequality suffered by single parents, widows and widowers, who often suddenly start getting taxed at higher rates through no fault of their own under the current system.
“There is an unjust distribution of tax burden between those on low or medium salaries and high earners,” back adds. “The rate at which we start to tax income should be much higher and we should stretch the tax brackets for those on average salaries.” Another long-standing demand from the OGBL has been to lessen the gap between tax on personal income and capital income. “Income from work is taxed much more. We want an increase in the tax on dividends and stock options...”
Back is also concerned that through the cost-of-living crisis and other factors, more and more households find themselves in precarious situations. “We have the highest rate of working poor in Europe, and the at risk of poverty rate is also climbing,” she says. To this end, the OGBL wants the next government to tackle the level of the minimum wage in Luxembourg. “The minimum wage is below what Statec says is the reference budget that a household needs to survive. It is also below what the EU directive says it should be, which is 60% of the country’s median wage. So we are demanding a 10% increase.”
Luxembourg’s collective bargaining law, which she says is outdated and does not meet the demands of the current economy and way of working, is another target. This has led to what she says is a relatively low uptake. “Only around 50% of companies in Luxembourg have a collective agreement. The EU has set a target for member states to have at least 80% covered by collective agreements.”
Indeed, workers’ protection is a priority and Back wants to see a debate on working hours and to ensure that employees have a healthy work-life balance. “A demand for shorter working is in our DNA as a union,” she says. “But we see that Luxembourg in general has longer working hours of any of our neighbouring countries.”
As for the tripartite and the so-called Luxembourg social model, Back says that it proved once again to be useful during the covid pandemic and the more recent energy crisis. “Indexation is a law that should not be touched. That is a red line for the OGBL.” She is pleased that nearly all parties have stated in their manifestos that they will maintain the index. “It is an essential tool in the fight against the loss of purchasing power and it has helped Luxembourg avoid the industrial action that we have seen in other countries caused by inflation.”
A version of this article originally appeared in Delano’s Autumn 2023 magazine