A breakthrough on the tax scale, but the fight goes on!

The OGBL National Committee met on March 28th at the Maison du peuple in Esch-sur-Alzette. First, it reviewed the tripartite agreement reached last March. “It is a good tripartite agreement (…) It provides considerable support for the purchasing power of households”, stressed the OGBL President.

The measures adopted in this agreement, as well as in the agreement of September 2022, have also contributed to keeping inflation under control. In this context, it is interesting to note that Luxembourg currently has the lowest inflation rate in Europe, followed by Belgium – one of the few other countries, along with Luxembourg, to have a wage indexation system. These figures show once again that the thesis defended by all anti-union circles that the index itself feeds inflation, the so-called “auto-ignition effect”, remains a pure myth.

In response to some of the criticisms leveled at the measures adopted under this tripartite agreement – their alleged lack of social orientation – the National Committee also wished to make a number of clarifications. First, it should be remembered that the crisis of purchasing power is currently reaching the middle classes, so it was important to ensure that not only low-income households but also middle-income households were supported.

Second, the energy price cap is also a social measure. Although high-income earners also benefit from the energy price cap, the main beneficiaries are still low and middle-income earners, who on average spend a much higher proportion of their income on energy costs.

The increase in the tax credit for notarial deeds for home purchases (“bëllegen Akt”), which is mainly aimed at young working people, also has a social dimension in itself, given the population it targets.

Finally, with regard to the adjustment of the tax scale in line with inflation, which was the OGBL’s main demand in the tripartite negotiations and which was partially accepted in the agreement, the National Committee would like to point out that, although high earners also benefit from this, it is once again the small and medium earners who are the main beneficiaries, since they are the main victims of the “cold progression” resulting from the failure to adjust the scale in line with inflation.

The OGBL also sought to contextualize its demand that the tax scale be brought in line with inflation by pointing out that the OGBL also has a much wider range of demands in the area of taxation. However, given that the government had already made it clear for some time that it would not be undertaking any further major tax reforms during this legislature, the OGBL decided to focus on this single demand, which had become more than urgent given the current pressures on household purchasing power.

In fact, if nothing had been done, households would have suffered no less than 8 tax increases between 2017 and the end of 2023. For a gross salary of 5,000 euros – the income level currently most affected by the cold progression – this would have amounted to a tax increase of around 2,000 euros per year over this period. “It was urgent to do something at this level to increase the purchasing power of households. We didn’t get everything. But it’s a very important symbolic first step. And we’re still calling for full adjustment,” said Nora Back. This breakthrough is all the more important given that a week before the tripartite meeting, the government was still strongly opposed to the idea, calling such a measure “irresponsible” and “financial hara-kiri”.

The OGBL’s other tax-related demands have not gone away. On the contrary. Luxembourg’s tax policy remains profoundly unfair and this trend must be reversed. The OGBL intends to make its demands clear to the political parties before the national elections in October 2023.

On the tax front, the OGBL is calling for the full adjustment of the tax scale to inflation, the exemption of the social minimum wage from taxation, the broadening of the tax scale so that the tax burden rises more slowly with income, and the creation of additional tax brackets for the highest incomes.

But the OGBL also points out another flagrant injustice: income from capital is scandalously taxed less than income from work. Here, too, it’s time to act.

Another priority of the OGBL in the run-up to the national elections in October is the minimum social wage, which must be structurally increased. In recent years, the minimum wage has risen by a modest 0.9%, above the regular adjustment to general wage trends, while the OGBL has been calling for a 10% increase for years.

Reform of the Collective Bargaining Law is another of the OGBL’s key demands to the political parties in the run-up to the elections. The law is no longer adapted to the economic reality of the country. The coalition program provided for such a reform, but unfortunately it was not implemented. Everything remains to be done.

Not surprisingly, the OGBL also intends to keep a close eye on how the parties position themselves with regard to the index, which remains a red line for the OGBL. Finally, the reduction of working hours and the defense and even improvement of our pension system are two of the OGBL’s other key demands in the run-up to the general elections.

The OGBL’s May 1 speech is expected to detail its demands.

>> A new tripartite agreement that strengthens purchasing power and guarantees the index