{"id":10005,"date":"2025-09-29T11:03:23","date_gmt":"2025-09-29T09:03:23","guid":{"rendered":"https:\/\/www.uni.lu\/c2dh-en\/?post_type=news&p=10005"},"modified":"2025-09-29T12:36:15","modified_gmt":"2025-09-29T10:36:15","slug":"study-exploring-luxembourgs-tax-competitiveness","status":"publish","type":"news","link":"https:\/\/www.uni.lu\/c2dh-en\/news\/study-exploring-luxembourgs-tax-competitiveness\/","title":{"rendered":"Study exploring Luxembourg\u2019s tax competitiveness co-written by Beno\u00eet Majerus"},"content":{"rendered":"\n
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On 23 September 2025 the Scientific Unit of the Chamber of Deputies<\/strong> released a 128 page study exploring Luxembourg\u2019s tax competitiveness<\/a>. The report explains how multinational enterprises have historically paid much less than the statutory corporate tax rate\u2014only about 0.9 percent in some estimates\u2014even though the headline rate exceeded 29 percent. The multidisciplinary study was produced by a multidisciplinary team from the Scientific Unit that included geographer Estelle Mennicken<\/strong>, tax jurist Julie Kaprielian<\/strong>, historian Fabio Spirinelli <\/strong>and two researchers from the University of Luxembourg, Nora Paulus<\/strong> and Beno\u00eet Majerus<\/strong>.<\/p>\n\n\n\n

The report\u2019s fourth chapter offers a critical history of the Grand Duchy\u2019s financial centre <\/strong>and was co written by Beno\u00eet Majerus. The chapter reframes the master narrative of Luxembourg\u2019s success by showing how fiscal sovereignty has been constructed over nearly a century and how it has adapted to changing international norm.<\/p>\n\n\n\n

The historical chapter traces Luxembourg\u2019s fiscal competitiveness back to 1929, when steel giant ARBED (today ArcelorMittal) promoted a law creating a special regime for holding companies. Intended to protect local capital from foreign takeovers, the law granted tax exemptions to companies holding participations and, according to contemporary socialist deputy Ren\u00e9 Blum, effectively created a fiscal immunity that introduced a form of capitalist feudalism. Despite these critiques, the regime quickly succeeded, enabling banks, notaries and lawyers to establish thousands of holding companies and making Luxembourg a leading hub for tax planning. The chapter emphasises that predictability and legal flexibility, rather than unusually low rates, formed the core of Luxembourg\u2019s strategy.<\/p>\n\n\n\n

In the post\u2011war period the holding law\u2019s tax advantages were extended to investment funds, which catalysed a new industry but also led to controversy when the Luxembourg\u2011registered funds of the Investors Overseas Service (IOS) collapsed in the early 1970s. Luxembourg then shifted its focus to the Euromarket; thanks to relaxed banking regulations and favourable listing conditions, the number of foreign banks in the Grand Duchy grew from seven to ninety\u2011six between 1966 and 1979. The financial centre diversified further as domiciliation became a lucrative business for fiduciary firms and law offices, and by the 1980s private banking emerged to serve a middle\u2011class international clientele\u2014epitomised by the \u201cBelgian dentist\u201d who sought to shelter savings from home\u2011country taxation. Banking secrecy, implicitly marketed since the interwar period, was formally codified only in 1981, and the study shows how these developments together forged a complex financial ecosystem.<\/p>\n\n\n\n

The report underscores the reputational risks associated with this model. Scandals such as IOS, Banco Ambrosiano, BCCI, LuxLeaks and the Panama Papers have repeatedly cast the financial centre in an unfavourable light, reinforcing foreign perceptions that Luxembourg\u2019s arrangements undermine other states\u2019 tax bases. The historical analysis also highlights the practice of \u201cnegotiated fiscality\u201d, whereby personalised tax rulings and exemptions were offered outside clear legal frameworks, potentially violating equality before the law. While Luxembourg never relied exclusively on low tax rates, the combination of predictable laws, bespoke rulings and a cooperative public\u2013private network proved highly attractive to multinational groups. This approach, however, also led to criticisms that profit shifting via Luxembourg deprives neighbouring countries of revenue and erodes trust.<\/p>\n\n\n\n