In a speech addressed to the Luxembourg Parliament on May 22, 2008, Jean-Claude Juncker, the Luxembourg Prime Minister,  shed lights on Luxembourg’s economic, social, and financial situation and proposed important changes, mainly from a taxation perspective.
Brief overview of the main changes proposed:

• Relating to corporate taxation
  • Progressive decrease of the corporate tax rate from 29.63% to 25.5% with a possible broadening of the corporate tax base
  • Abolishment of capital duty as from January 1st , 2009
• Relating to personal taxation
  • Income tax brackets for personal income tax will be increased by 6% in 2009
  • Increase of tax deduction ceilings (insurance premiums)
  • Tax allowance of € 600 for salaried and pensioned taxpayers will be replaced by a tax credit of € 300
  • Single parent allowance of € 1,920 will be replaced by a tax credit
  • Salary indexation will be restored as from 2010 (unless the economic situation worsens)
  • Introduction of specific measures for people with low income
• Relating to Philanthropy  and Environment
  • The maximum tax deductible amounts for donations to certain charitable organization are doubled from € 500,000 to € 1,000,000, respectively from 10% to 20% of the net income
  • No increase of the duty on road fuel (petrol and diesel) and of excise duties
  • Company cars will benefit from the € 750 incentive granted for the purchase of low-emission cars (< 120g CO2/km)

While promoting environmental and philanthropic measures, those proposed reforms mainly aim at enhancing Luxembourg attractiveness for investors, in the context of a general slowdown of the global economic activity, which justify the introduction of social measures.
On the whole, it is a balanced evolution allowing for a preservation of Luxembourg competitiveness in a new economic context.