Yuriko Backes presented the state of the state’s finances at a joint meeting of the Finance and Budget Committee (Cofibu) and the Budget Implementation Committee (Comexbu), 21 November 2022. Photo: MFIN

Yuriko Backes presented the state of the state’s finances at a joint meeting of the Finance and Budget Committee (Cofibu) and the Budget Implementation Committee (Comexbu), 21 November 2022. Photo: MFIN

Despite a “still favourable” budget balance at the end of the third quarter of 2022, the minister of finance remained cautious about the state of public finances. Inflation-related spending could be more significant at the end of the year.

after tabling the , finance minister (DP) presented the public balance sheet as at 30 September 2022. The result: a “still favourable” budget balance at the end of the third quarter, although it is “too early to draw conclusions”.

Central government revenues amounted to €17.7bn. Those of the three tax administrations amounted to €15.1bn, up by €1.2bn in one year. They represent 78.7% of the revenue of the budget voted, compared with 84.1% in the same period in 2021.

It is mainly the tax on salaries and wages (+€498m) that contribute to this, thanks to the dynamic labour market, the cumulative effect of the two salary indexations and the postponement of a payment from the end of 2021 to the beginning of 2022. The energy tax credit had a negative impact and currently represents a cost of €193m.

75% not reached for customs and excise

Revenues at the Registration, Domicile and VAT Administration are up by €444m (+9%). However, the level of execution reached 76.9% of the voted budget compared to 85.3% in the same period in 2021. VAT revenue increased by €339 million (10%) due to inflation.

For the Customs and Excise Administration, revenues grew by 3%, but the threshold of 75% of the budget was not reached. This compares to 82.3% in the same period in 2021. The reason for this is diesel sales, which have fallen by 9% in one year.

Against this revenue, the central government’s expenditure came to €16.8bn (+3%). “The effects of inflation on expenditure will only recover later and in 2021,” Backes warned. In the first nine months of the year, €209m were spent under the Solidaritéitspak 1.0 and Energiedësch aid programmes.

€924m balance

The central government’s positive balance decreased from €1.1bn on 30 June to €924m on 30 September 2022.

Backes expressed her “confidence in the resilience of our public finances”. She therefore maintains her “commitment to provide for targeted tax cuts that favour the purchasing power of households and the competitiveness of the Luxembourg economy, should the favourable situation continue to persist and should a structural improvement emerge in relation to the trajectory admitted in the draft budget.”

For 2023, central government revenues were projected to be €24.5bn, compared to €27.3bn in expenditure, resulting in a deficit of €2.8bn.

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