In 2020, 11.9% of the grand duchy’s working population was at risk of poverty, placing the country in fourth position on an EU-wide level, “It is important to act now and implement policies that guarantee working people an income that allows them to live in dignity. In-work poverty must be seen as a major challenge by Luxembourg policymakers,” the open letter says.
Caritas cites the Luxembourg minimum wages as one of the reasons for in-work poverty. In April 2020, this was set at €2,141.99 excluding taxes for unqualified workers and €2,776.05 for trained staff. Although this seems generous compared to other EU member states, with the rising cost of living the country witnesses it isn’t enough, states the NGO. Foreign residents, as well as single-income households, and different sectors are more at risk of being exposed to poverty while actively employed.
In the grand duchy, , and more than one in ten was considered working poor. Calculations to determine the latter status do not include the cost of accommodation, however. Cross-border workers are also not included in the statistics, despite making up nearly half of the work force of Luxembourg, Caritas points out.
Tax system and work-life balance at heart of demands
People should not live to work, but be able to live from what they earn, Caritas states. A few days ahead of Labour Day on 1 May, it therefore calls on the government to undertake changes. Aside from using the reference budget--which calculates how much a person should make to live in the country--to determine the level of the minimum wage, the state should regularly review and adjust various types of aid and allowances.
Though the government increased its cost-of-living allowance and provides an energy aid following the surge of energy prices, lower income houses are still more at risk of poverty. Therefore, a tax reform is needed, “with real redistribution for more social justice,” Caritas states.
It explains: “Income tax should be reduced in the lower brackets of the scale and increased in the upper brackets, or even add extra brackets at the top. The tax system should be designed to systematically exempt the poor from paying income tax and other taxes, where possible,” Caritas said, adding that a person’s marital status should have no impact on their taxes. Currently, single residents of Luxembourg are placed in a higher tax bracket than those who are married or in a domestic partnership (known as Pacs), even if the couple does not have children.
before the next elections in October 2023, but the pandemic and energy crisis have put this on hold.
Lastly, the NGO also asks for better vocational training with more options, and more efforts to allow workers to develop their private life and interests, as many working poor are also time poor.
Déi Lénk deputy Myriam Cechetti commented on the open letter in a tweet, stating that her party had repeatedly brought the tax reform to the front.
A complete tax reform is not currently in the cards, however, Delano understands. According to a source, the next thing that will be reformed is the real estate tax. A vast reform of the taxation system in a time that is uncertain is not in the cards before the next elections, but taxes should not be raised either. In the context of the pandemic, for 2020-2021, the government has spent €2.8bn on residents and businesses. Additional aid to students and households were also handed out as part of the solidarity package. And although the impact of the war in Ukraine on Luxembourg’s economy is yet to be known.