International Taxation and Luxembourg's Economy

37 Pages Posted: 26 Jan 2021

See all articles by Ruud A. De Mooij

Ruud A. De Mooij

International Monetary Fund (IMF); CESifo (Center for Economic Studies and Ifo Institute); Oxford University Centre for Business Taxation

Dinar Prihardini

International Monetary Fund (IMF)

Antje Pflugbeil

International Monetary Fund (IMF)

Emil Stavrev

International Monetary Fund (IMF)

Date Written: November 1, 2020

Abstract

Luxembourg receives ample investment from multinational corporations, in part due to some attractive features in its international tax rules. Around 95 percent of these foreign investments pass through Luxembourg via companies performing holding and/or intra-group financing activities. While their contribution to Luxembourg's economy is modest relative to their large overall balance sheets, they still generate around 3 percent of GDP in tax revenue, create almost 4500 direct jobs, and spend almost 3 percent of GDP on salaries and purchases of business services. Ongoing changes in the international corporate tax framework pose risks to these economic contributions, which this paper attempts to quantify. It also discusses options for reforms in Luxembourg's tax system that could help offset adverse revenue and economic effects.

JEL Classification: H25, H26, H87, H20, G15, E25, H23

Suggested Citation

De Mooij, Ruud A. and Prihardini, Dinar and Pflugbeil, Antje and Stavrev, Emil, International Taxation and Luxembourg's Economy (November 1, 2020). IMF Working Paper No. 2020/264, Available at SSRN: https://ssrn.com/abstract=3772468

Ruud A. De Mooij (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Oxford University Centre for Business Taxation ( email )

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Oxford, Oxfordshire OX1 4AU
United Kingdom

HOME PAGE: http://people.few.eur.nl/demooij/

Dinar Prihardini

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Antje Pflugbeil

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Emil Stavrev

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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