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Top five stories you may have missed
News roundup

Top five stories you may have missed

4 min. 29.10.2022 From our online archive
In case you missed them, the Luxembourg Times has selected the week's top five news stories for you
Finance Minister Yuriko Backes did not meet with EU lawmakers on their visit to the country last week
Finance Minister Yuriko Backes did not meet with EU lawmakers on their visit to the country last week
Photo credit: Gerry Huberty

Tax criticisms of Luxembourg fell on deaf ears

Luxembourg officials did not produce enough evidence that the country was deterring tax avoidance to satisfy European Parliament critics who previously said the Grand Duchy behaved like a tax haven.

Members of the Parliament's tax committee visited the Grand Duchy on Friday for a fact-finding mission that included talks with Luxembourg tax officials, lawmakers and tax leaders of Big Four accounting and consulting firms Deloitte, KPMG, and PwC. EY did not meet with the visiting committee.

MEPs wanted to know more about Luxembourg's lack of withholding taxes for corporate payments of royalty and loan interest to all low-tax jurisdictions, two sources with knowledge of the matter told the Luxembourg Times on Monday.

Luxembourg wants EU to extend climate duties to companies

Luxembourg and other EU countries want companies to face stronger climate-protection responsibilities under a proposal that would hold businesses accountable for their environmental and human-rights impact.

Luxembourg Environment Minister Joëlle Welfring backed Finland during a meeting of EU ministers on Monday in urging that developing due-diligence requirements on businesses conform to the bloc's commitment under the Paris Agreement. That agreement would see the EU cut greenhouse gas emissions by more than half of 1990 levels by 2030 and reach net zero emissions by 2050.

The developing directive foresees a regime of rules, sanctions and arbitration for victims, especially outside the bloc, if EU-based companies breach human rights rules including on child labour or pollution. Luxembourg and Spain joined Belgium in wanting the directive discussed at Monday's meeting in the Grand Duchy.

Unshell pushing funds to hire in Luxembourg, KPMG says

Luxembourg funds are hiring more staff as a result of the upcoming "Unshell" directive that is likely to impact the way alternative funds are structured, an industry segment that has seen a 10% increase in value over two years, according to KPMG.

"In light of [...] the recent [Unshell] proposal, there will be an increasing need to consolidate a certain level of operations and infrastructure into one jurisdiction rather than relying on several platforms as we observed in several instances", KPMG said in the preliminary results of the 2022 Alternative Investments Substance Survey.

The so-called "Unshell" directive would force holding companies to prove they were not solely created for tax reasons by requiring them to show they had income, staff and premises. Luxembourg's all important €5.3 trillion fund industry uses holdings as the legal parent company of funds, which means those companies may be in scope of the Brussels proposal.

Luxembourg's planned big budget gap still too rosy

Luxembourg's €2.8 billion budget hole for next year - the second-biggest in its history - was based on an outlook that has since proven to be too rosy, as tax revenues may come in lower than what the government expects.

Economic forecasts underlying the 2023 budget assumed that the world economy would continue to grow, with the likelihood of the euro area sliding into a recession - the "risk scenario" - at just 20% three months ago.

But that worst-case trajectory is now the baseline, forecast advisor Ferdy Adam from the national statistics agency Statec told the Luxembourg Times last week, with 0% growth pencilled in for the euro area, and the IMF expecting one-third of the global economy to contract next year.

That puts in doubt the budget figures Finance Minister Yuriko Backes presented to lawmakers just this month, which were based on modelling from the London-based consultancy group Oxford Economics.

Luxembourg needs to bolster fraud detection - EU prosecutor

Luxembourg needs to do more to detect fraud with EU funds and should bolster its efforts to help bring the perpetrators before court, a top prosecutor the country has delegated to the EU told the Luxembourg Times.

The European Public Prosecutor’s Office (EPPO) - which last year became the latest EU institution to set up shop in Luxembourg - estimated that losses against the EU budget in Luxembourg for that year amounted to €546,000. 

Yet the body only received eight reports of suspected fraud from the Grand Duchy last year. Anyone from private individuals to EU institutions or prosecutors could report suspicions of fraud. Just one case reported resulted in an investigation.  

“We have a clear problem of detection in Luxembourg,” Gabriel Seixas, Luxembourg’s chief prosecutor at EPPO, said in an interview.

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