On June 20, the OGBL presented its demands to the political parties for the October parliamentary elections (see the July issue of Aktuell). Ten days later, the UEL followed suit. On July 4, at its last meeting before the summer break, the OGBL National Committee analyzed and commented on these employers’ demands.

If there is one issue that is currently preoccupying both the OGBL and the employers, it is the predicted labor shortage in Luxembourg, which is already beginning to be felt. According to the employers’ association, the country’s prosperity “depends on Luxembourg’s ability to attract, train and mobilize the talents of tomorrow. Sustainable talent…”. While the choice of lexicon is more than debatable, the OGBL shares the UEL’s analysis and objective.

In other words, wages and working conditions must enable companies to retain their employees. But this is precisely where the solutions proposed by the UEL run the risk of failing. The UEL proposes to make working hours more flexible, i.e. to make employees more available to their companies. Do the employers’ representatives really think that they can make the Luxembourg labor market more attractive by demanding more flexibility from employees, when many of them already find it difficult to reconcile their professional and private lives? For the OGBL, this proposal of the employers is completely lunar.

The UEL is also in favor of making employment contracts more flexible. This proposal is a clear expression of the employers’ desire to make jobs more precarious, especially for young people entering the world of work. The OGBL, for whom the permanent contract (CDI) is the only real employment contract and should therefore be extended, is firmly opposed to this approach.

Another major area of disagreement is taxation. What does UEL propose? Unsurprisingly, to increase the tax attractiveness for companies, even though they have already benefited from two tax cuts in the last two legislatures, while households have been hit by a whole series of tax increases. For the OGBL, it is clear that the opposite should be the case: more tax fairness between the taxation of households and the taxation of companies, and more tax fairness between the taxation of income from work and the taxation of income from capital.

The pension system also features prominently in the UEL’s roadmap to the government. For months now, employers’ representatives have been trying to impose on the public debate the idea that the pension system is unsustainable in the long term and that it is therefore necessary to reform it now in order to make it sustainable. The reality is somewhat different. Admittedly, there are projections, notably by the IGSS, which suggest that the system will one day become unbalanced. But the OGBL would like to emphasize that these are purely mathematical models based on a series of indicators whose real evolution (births, productivity, employment, etc.) no one can predict and which point to a possible imbalance in the distant future. But in the last three years at the latest (the swine flu pandemic, the war in Ukraine with its geopolitical repercussions, the energy crisis, the increasing number of trade conflicts), everyone should be aware that it’s impossible to predict anything in such a long term. We might as well rely on a crystal ball. For the OGBL, this kind of exercise is like fortune telling.

Of course, you have to be able to predict the future, but it has to be tangible. And for the moment, the Luxembourg pension system is in a comfortable position. In fact, the pension system’s equalization fund currently has reserves of 23.4 billion euros (23,400,000,000 euros). That’s 4.29 times our current expenditures. So there’s really no urgent need to act.

On the contrary, the OGBL believes that it’s time to improve the pension system to reverse some of the deterioration caused by the 2012 reform. According to calculations by the Chambre des salariés, future pensioners, who will be hit by the full effects of this reform, will have a shortfall of between 23% and 32% compared to those who were pensioners before the reform came into force. It’s also absolutely necessary to increase the minimum pension.

And should the pension system ever run into difficulties, the OGBL, unlike the UEL, is in favor of increasing contributions (Luxembourg has one of the lowest contribution rates in Europe) as well as the contribution ceiling, so that higher incomes are taxed more heavily. It certainly doesn’t advocate raising the retirement age.

One thing is certain: given the list of demands presented by the employers, the discussions with the UEL in the coming years are likely to be turbulent. The OGBL is aware of this and will be present on all fronts in the interests of employees, pensioners and their families.

A comparison of the “Spëtzekandidaten” (leading candidates) at the level of “human rights and business”

Despite the excellent study by Dr. Başak Bağlayan commissioned by the Ministry of Foreign Affairs (in line with the coalition program) and the realization that effective national legislation is achievable, the outgoing government was unwilling to take responsibility as was done in neighboring countries (France and Germany). Instead of initiating a real process of corporate accountability, the Ministry of Foreign Affairs preferred to launch a voluntary pact with the Union des entreprises luxembourgeoises (UEL). At this stage, this National Pact is nothing more than a social and greenwashing exercise. The Initiative pour un devoir de vigilance (IDV), composed of 17 civil society organizations, sent a questionnaire to the “Spëtzekandidaten” of the political parties. This questionnaire asked the leading candidates whose political parties had spoken during the legislative period to make clear and unambiguous statements about future legislation in Luxembourg regarding human rights and business.

Questions to the “Spëtzekandidaten”

The questionnaire to the “Spëtzekandidaten” considered two different scenarios, both leading to national legislation.

If you were to assume responsibility in a future government, would you commit yourself to addressing the following human rights, environmental and climate challenges?

Should the trialogue fail to produce a European directive, would you support the drafting and adoption of a national law in line with international standards on corporate due diligence, as exists in neighboring France and Germany?

If a European directive is finalized at the EU level, what human rights, environmental and climate due diligence challenges are you prepared to address when implementing the European Corporate Sustainability Due Diligence Directive into national law?

Leading candidates Paulette Lenert, Sam Tanson, Marc Baum, Sven Clément and Luc Frieden responded to the questionnaire; for the DP, Lex Delles responded on behalf of Xavier Bettel, and Fred Keup (ADR) did not respond. It should be noted that ADR’s position on certain points is known from their statements in other contexts.

The results allow us to draw some important conclusions about who is willing to take on what responsibilities with respect to human rights and business.

SCENARIO 1: Failure to negotiate a directive at the EU level

Unfortunately, this scenario remains a possibility, as some political and especially business circles are betting on the failure of negotiations at the EU level.

What do Luc Frieden, Lex Delles and Fred Keup have in common?

The study commissioned by the government on the possibility of legislation on human rights and business has produced a clear and unambiguous result. But the work of the interministerial committee dragged on and on because of tensions between the ministries involved.

When asked who would be in favor of national legislation if the draft directive failed, the “Spëtzekandidaten” of the three political parties in the current government, Sam Tanson (déi gréng) and Paulette Lenert (LSAP), are in favor of legislation in Luxembourg as it has been introduced in our neighboring countries. Only Lex Delles (DP) is against such a law. So we can also see who has been most opposed to progress during this legislative period.

The “Spëtzekandidaten” Marc Baum and Sven Clement are also in favor of national legislation. Luc Frieden (CSV), like the DP candidate, is against national legislation. As for the representative of the ADR, who did not answer the questionnaire, the party’s position is well known: the ADR is against any national legislation that would make companies responsible for human rights.

SCENARIO 2: Transposition of a European Directive into national law in Luxembourg

If the Corporate Sustainability Due Diligence Directive is adapted at the European level, it will have to be transposed into national legislation. EU Member States – including Luxembourg – will also be able to go beyond the Directive in certain areas.

Paulette Lenert, Sam Tanson, Marc Baum and Sven Clement with the victims

It should be noted that, compared to the position of other EU member states, the current government’s commitment to stand by victims is one of its most positive points in the Brussels negotiations on a directive.

Who is in favor of reversing the burden of proof in favor of victims of human rights abuses to ensure effective access to justice? The position of Sam Tanson, the current Minister of Justice, was supported by the “Spëtzekandidaten” Marc Baum, Sven Clement and Paulette Lenert, while Lex Delles and Luc Frieden are against reversing the burden of proof in favor of victims.

On a second point, there was unanimity among the “Spëtzekandidaten” who responded to the questionnaire: all answered “yes” to the question “that courts should be able to order the disclosure by the company of evidence under its control in accordance with national procedural law, subject to Union and national rules on confidentiality and proportionality”.

Luc Frieden for accountability of the whole financial sector – Lex Delles against

Regarding the accountability of the entire financial sector, and in particular the inclusion of investment funds, it should be noted that the current government’s position is in fundamental contradiction with international standards, and in particular the United Nations Guiding Principles. It should be noted that the United Nations Working Group on Business and Human Rights intervened in the discussions on this directive and stated in July 2023 that the UN Guiding Principles clearly indicate that the responsibility to respect human rights applies fully to all financial institutions.

Given that there are still major challenges at the level of investment funds and a very limited responsibility for the banking sector at the level of the UN Guiding Principles, this issue is of great importance if Luxembourg really wants to be in line with international standards, which is clearly not the case in this area.

Like Marc Baum, Sven Clement, Sam Tanson and Paulette Lenert, Luc Frieden of the CSV (former Minister of Finance) is in favor of including the financial sector, and in particular investment funds, in the legislation, taking into account the specificities of the sector. However, Paulette Lenert points out that competitive risks must be analyzed and that a gradual approach is needed.

Lex Delles does not agree with the proposal because investment funds only have the task of managing investors’ assets and these assets are subject to the provisions of the Directive.

As a result, it should be noted that all the “Spëtzekandidaten” who responded to the questionnaire are in favor of making the entire financial sector responsible, with the exception of the DP representative. This reflects the current position of the Ministry of Finance.

Which companies should be included in the legislation?

Who is in favor of including companies with 250 or more employees and a turnover of 40 million, and who is in favor of including the entire corporate value chain in the legislation?

All participating “Spëtzekandidaten” answered “yes” to these two questions, except for the company threshold (250 employees and turnover), which the “Spëtzekandidat” of the DP did not want to answer at this stage.

(Almost) all in favor of a duty of climate vigilance

All “Spëtzekandidaten” who took part in the questionnaire answered this question with “yes”, except Lex Delles (DP), who justified his abstention with the argument that there were still discussions at trialogue level in the EU and he didn’t want to prejudge.

Paulette Lenert, Sam Tanson, Marc Baum and Sven Clement: a strong coalition for human rights

If we also take into account the question of national legislation in the event of a failure of the trialogue, we can see that the “Spëtzekandidaten” Marc Baum (déi lenk), Sven Clement (Piraten), Sam Tanson (déi gréng) and Paulette Lenert (LSAP) of the following political parties would clearly be the most in line with international human rights and corporate standards with a “yes” to all seven questions. “Spëtzekandidat” Luc Frieden of the CSV also demonstrated a commitment to human rights and business with 5 positive answers out of 7 questions. Lex Delles of the DP, on the other hand, did not give a clear answer to two questions and gave three negative answers out of seven. The ADR candidate did not participate in the questionnaire, but his party states in its election platform that it is generally in favor of the UN Guiding Principles on Business and Human Rights, without providing the details requested in our questionnaire.

In this context, it should be noted that political parties and governments generally declare themselves in favor of the UN Guiding Principles, but do not hesitate to oppose them when it comes to introducing concrete legislative measures. Indeed, the current Luxembourg government also declares itself “in favor of alignment with international norms and standards on due diligence”. On the other hand, in negotiations at the EU level, Luxembourg currently supports a lowering of the international standard for responsible corporate conduct, especially in the financial sector (including investment funds).

The Duty of Care Initiative calls on the “Spëtzekandidaten” and their political parties to position themselves in possible coalition negotiations for a future government and to strive for compliance with the UN Guiding Principles in order to:

• Respect the will of 92% of the resident population to adopt a national law and implement national legislation in accordance with international standards,
• Commit in parallel to the proposed Directive on Corporate Sustainability Due Diligence, with a clear and transparent position in favor of effective and strengthened legislation,
• Ensure that the state, state-owned enterprises and state institutions fully and immediately guarantee compliance with the UN and OECD Guiding Principles on Business and Human Rights in their own economic activities.

The victims of human rights violations must not be forgotten in these negotiations, and respect for human rights and a commitment to sustainable development must become part of the DNA of business in 21st century Luxembourg.

Press release of the Initiative pour un devoir de vigilance au Luxembourg, September 21, 2023

While the communal elections are barely over, the last aldermenial coalitions are being formed and the new mayors are eagerly awaiting their assermentation, the parliamentary elections are approaching with great speed.

Political parties are currently nominating their candidates for the autumn elections and finalizing their election programs.

In this edition of Aktuell, the OGBL gives them a helping hand.

We expect the political parties to commit themselves to the safeguarding and normal operation of the index, and to oppose any manipulation of it. No matter what the economic context, as far as the index is concerned, for us there will be zero tolerance, and we will of course be analyzing election programs in detail on this point and monitoring candidates’ statements during the election campaign.

Another issue that concerns us is pensions. In reality, political debates should focus on current and urgent problems such as housing, inequality and the ecological transition, but unfortunately some prefer to tackle the subject of pension funding on the basis of hypothetical scenarios for 2070. The OGBL will not accept any further deterioration in our pension scheme – zero tolerance, here too!

In fact, calculations by the Chamber of Employees show that the 2012 reform has already resulted in substantial progressive deterioration, which will mainly affect future pensioners between now and 2052. The 2012 reform, so-called for the younger generations, is in fact directed against today’s youth. The OGBL calls for this reform to be withdrawn, and for the pension readjustment of the end-of-life allowance called into question by the 2012 reform to be maintained in full.

Taxation will certainly be a key issue in the election campaign. For the OGBL, it is clear that the current tax system is unsatisfactory and even reinforces inequalities. It’s not enough for politicians to regularly denounce these growing inequalities in Luxembourg; they must respond to them in concrete terms. And there are pragmatic measures that can help.
Starting with social benefits, which need to be increased in order to regain efficiency: in recent years, social transfers have been reducing the risk of poverty in Luxembourg less and less.

Then, of course, there’s taxation, which is the royal road to reducing inequality. And for this very reason, tax reform must not, as I recently heard from a leading candidate, lead to lower taxes for everyone.

A tax reform worthy of the name, as the next government must implement it, must include several aspects to achieve greater tax justice.
At the level of the tax scale: an exoneration up to the level of the social minimum wage, a widening of the brackets to flatten the “Mëttelstandsbockel” (middle classes’ bump), but also the introduction of higher marginal rates for high incomes.

In order to neutralize the tax increases incurred over the last five years as a result of the government’s decision not to fully adjust the salary scale to inflation, the OGBL is calling for the scale to be adjusted to inflation by 5.5 index tranches, in addition to what has already been retained in the tripartite agreement of March 2023 at the urging of the OGBL. And to avoid further delays in these adjustments in the future, the OGBL is calling for a legal automatism providing for regular adjustment of the scale in line with inflation.

With regard to income taxation, the OGBL urges compliance with the principle of “equal income, equal tax”. This means putting an end to the privileged tax regime enjoyed by capital income compared with salaries and pensions. It is unacceptable that capital income, which is mainly received by affluent households, is not taxed in full and benefits from numerous niches.

Another major injustice, denounced by the OECD, is the virtual tax exemption of movable and immovable assets. The absence of wealth tax for individuals, the absence of inheritance tax for direct descendants, and the absence of a progressive and effective property tax to combat speculation are not only elements of tax injustice, they also represent a major ” loss of revenue ” for public funds, at a time when the challenges of social, ecological and digital transition that need to be financed are enormous.

A final word on labor law – an area that is obviously close to our hearts. Unfortunately, the last five years have not seen any major progress in this area. The positive elements set out in the government agreement have not been implemented. Yet we need to modernize labor law with a view to improving the rights of employees and their representatives.
These improvements must be made within the framework of social dialogue. The OGBL
is ready for this.

… if policymakers abandon the illusion that the free play of market forces will solve it.

The glaring discrepancy between wage and price trends in the housing sector is having an enormous impact on the situation and social prospects of many citizens, who are having to devote an ever-increasing proportion of their purchasing power to housing.

Acute housing crises are on the rise. At the same time, gentrification is gaining momentum, pushing low-income households out of a growing number of neighborhoods and localities.

Yet the pace and depth of policy responses are in open contradiction to the evolution of the housing crisis.

The rise in prices and values caused by the supply deficit and the prospect of a persistent long-term gap between supply and demand have led to a speculative dynamic unprecedented in the history of real estate.

The so-called free market will not solve the housing crisis, as it is largely responsible for creating and exacerbating it.

Intervention by the state and the law in the functioning of the market is not only defensible and legitimate, it is necessary and without alternative in the pursuit of the general interest of society.

Massive investment in the construction and purchase of public housing

For decades, the construction and acquisition of public housing and the acquisition of land and building plots by the State or local authorities have developed at a very low level. Compared to the housing market as a whole, it is even highly regressive. The OGBL calls for massive investment in public housing, with priority given to rental housing.

Taxation: a cornerstone in the fight against the housing crisis

Tax legislation must become a lever in the fight against speculation, the explosion of prices and the increase in the socially unjust distribution of real estate and building land.

All areas of the land market, construction and real estate that are exposed to speculative demand must be subject to new tax regulations.

It is important to distinguish speculative demand from housing demand. Higher taxation on owner-occupied housing is counterproductive and socially unjustifiable, given the general trend in housing costs.

1) All tax breaks that encourage speculation in the construction and real estate sectors must be abolished. Counterproductive tax provisions such as generous depreciation allowances, low capital gains tax and tax benefits linked to the receipt of loans must be abolished or limited to single-family homes.

2) National tax legislation is also needed to enable the Luxembourg State to tax gains arising from the sale of shares, rights or holdings in foreign entities which derive their value principally from real estate located in Luxembourg.

3) In addition to the problem of speculative purchases and land hoarding or the retention of building land and vacant dwellings, the speculative purchase of real estate is playing an increasingly important role. The excessive accumulation of real estate as a high-yield capital investment must be discouraged through taxation.

In order to curb excessive accumulation and encourage the release of land and building plots, a graduated tax intervention is needed, with tax allowances at the bottom and a progressive effect at the top.

There are several possibilities, such as the introduction of a progressive wealth tax or a progressive inheritance tax. Given the urgency of the crisis, a progressive wealth tax seems to be the most effective way compared to an inheritance tax.

The reform of the property tax could offer a way forward in this respect.

In addition to adjusting the basic tax values, the government should seize the opportunity to include in the reform an element of regulation against speculative demand and excessive retention of land, building land and real estate.

This would take the form of a progressive tax rate that, based on an allowance, increases progressively as the total value of the taxpayer’s built and unbuilt assets increases.

The progressive part of the property tax should be absorbed by a national distribution pot. This pot could be made available to municipalities and the state for the purchase of land and the construction of housing as part of public housing construction, according to distribution rules defined by law. In this sense, the property tax would make an essential contribution to the massive promotion of the construction and purchase of housing in public hands, which is also urgently needed.

The introduction of a so-called “retention tax” is also essential. This would apply to land included in general development plans that is deliberately left unbuilt by the owners, as well as to housing that has been left unoccupied (and often dilapidated) for several years, also for reasons that depend on the will of the owners. Such a tax is long overdue, and experience has shown that it requires national legislation.

As with the progressive property tax proposed above, the basis for calculating the property tax payable by the taxpayer in the case of speculative retention should be weighted according to a) the duration and b) the extent of speculative retention of building land or housing vacancies.

Similarly, the property tax should be particularly weighted in the case of second homes or temporary rentals, especially through digital platforms.

In addition, we need to ensure that these measures take effect quickly and not only in 10 to 15 years’ time.

Another very important fiscal issue in the fight against speculation is the taxation of capital gains when building zones are extended onto previously unbuildable land.

The multiple increase in the value of the land, which is not the result of the productive performance of a private landowner, but of a public decision and public investment, must largely benefit the public authorities.

The introduction of a high rate of taxation on this capital gain, combined with a public right of first refusal and a tax to prevent the speculative retention of building land, is therefore not only legitimate but essential if we are to combat effectively the speculative acquisition and hoarding of land.

What’s more, this measure represents an important source of revenue for the public authorities to support a more offensive public housing policy and to financially cushion the significant and costly social damage caused by speculation in the housing sector.

For a legal cap and regulation of rents, linking their maximum ceiling to the evolution of wages!

The leasehold law proposed by the government must be rejected outright, as it does nothing to alleviate the crisis situation and may even have the opposite effect in some respects.

At the heart of the criticism is the lack of rent regulation, which would establish the long-awaited link between rent trends and the incomes of tenant households.

The government is urged to replace the current outdated and counterproductive legislation on maximum rent levels with one that at least neutralizes the jaws effect that has occurred since 2015 between rent trends and trends in tenant incomes.

In addition, legislation is needed on brokerage fees that 1) decouples these fees from price trends in the real estate sector and 2) charges fees to landlords when the brokerage is retained by the landlord.

There is also a need for reform of tenancy boards, which need greater professional scope and rights to protect tenants and monitor compliance with the law.

Socially differentiated support models to achieve climate targets

In the context of the gradual decarbonization of society, the housing sector and spatial planning are of paramount importance for achieving the climate goals set by the COP21 climate conference (Paris 2015).

The targets set for the use of green building materials, energy savings and efficiency, and the use of renewable energy call for support policies that cover both new construction and the modernization, renovation, and rehabilitation of older buildings, while taking into account the social situation of homeowners.

This presupposes socially graded support models that are tailored to the different financial capabilities of the various strata of homeowners.

Unfortunately, the current concept of tax relief and state aid ignores the criterion of social justice. This neglect of the social aspect also unnecessarily complicates the achievement of climate goals.

It is also necessary to ensure by law that the portion of investment costs covered by public subsidies is not passed on to rents. In this context, a climate-friendly housing premium should also be introduced to reduce the burden on tenants in the event of rent increases.

André Roeltgen

The traditional spring quadripartite meeting was held on June 7, 2023. As in previous years, the financial situation of maternity health insurance and the improvement of dental benefits were discussed, but no significant progress was made.

Maternity Health Insurance financial situation

The first item on the agenda was an analysis of the financial situation of the Maternity Health Insurance Scheme. The balance sheet for 2022 shows an operating loss of 41.6 million euros.

Revenues of around 3,910.3 million euros are not enough to fully offset the increase in expenditures to 3,951.9 million euros in 2022.

The total reserve therefore falls from 903.2 million euros in 2021 (24.9% of current expenditure) to 861.6 million euros in 2022 (21.8% of current expenditure). However, the reserve is still more than twice the 10% minimum required by the Social Security Code. There is therefore no cause for concern.

For the fiscal year 2023, the latest estimates point to a deficit of around 41.5 million euros for current operations. As a result, the total reserve will continue to decrease to 820.2 million euros, or 19.1% of the estimated current expenditure for 2023.

During the presentation of the financial situation of the Maternity Health Insurance Fund, the OGBL insisted that efforts to restore the financial equilibrium of the health insurance fund should not be made at the expense of policyholders. The OGBL also insisted that the announced new benefits, which have been promised for years, should finally be implemented.

The Minister of Social Security assured us that the current financial situation would not affect the implementation of the planned new benefits.

The OGBL also pointed out that the government would have to take over the cash benefits for the maternity component – benefits that were transferred to the health insurance system in the 2010 reform. If the government were to take over this cost, it would more than offset the aforementioned deficit.

Improving dental benefits

Another item discussed at the meeting was new dental benefits. In 2017, it was decided to allocate 12.4 million euros for new dental benefits.

At the last quadripartite meeting on October 19, 2022, there had been lengthy discussions about including procedures such as fissure filling, filling materials, and cavity preparation (“wäisse Plomb”) in the nomenclature. No progress was made on this last point. The OGBL cannot help but feel that the Association of Doctors and Dentists (Association des médecins et médecins-dentistes – AMMD) is not really committed to finding a solution to this problem in the interest of the patient.

The OGBL also asked the Minister of Social Security when insured persons would finally be able to benefit from the Direct Integral Payment (paiement intégral direct – PID) scheme, which will provide financial relief to insured persons, enabling them to avoid having to pay money in advance for medical care. If the minister is to be believed, the scheme should be in place by September 2023.

Carlos Pereira, Member of the Executive Board