Protesters holding up signs and posters. (Photo: Halfpoint / Adobe Stock)

Protesters holding up signs and posters. (Photo: Halfpoint / Adobe Stock)

In a country where GDP per job ranks among the highest in the world, the question of tax fairness might seem secondary. Yet it lies at the heart of an important debate: who actually finances the Luxembourg social model, and to what extent does each contribute according to their means?

The available data paints a picture that deserves attention, highlighting numerous inequalities and fiscal imbalances in Luxembourg.

Among them, the most striking is the difference in tax treatment between capital income and labor income. An employee earning €4,000 per month pays around €500 in taxes, while equivalent dividends generate less than €100. A capital gain of €100,000 on shares can be entirely tax-exempt, whereas the same amount earned through labor would incur nearly €25,000 in taxes. The OECD ranks Luxembourg among the countries with the largest gap between the taxation of labor and capital.

This imbalance is accompanied by an erosion of tax progressivity. In theory, everyone contributes according to their income. In practice, between 2002 and 2019, the effective tax rate for the middle classes jumped from 13.2% to 21.4% (+62%), while that of the wealthiest households remained almost stable (from 22.1% to 21.6%). Today, middle classes finance 72.8% of the socio-fiscal system, even though they represent 61.4% of households.

The concentration of wealth adds a third layer. The richest 10% of households hold 48.6% of total wealth, and productive assets are even more concentrated: 73% belong to the wealthiest 5%. In terms of inheritance, 83% of transferred wealth benefits the richest 10%. Some €350 billion will eventually be passed on, largely without taxation.

Questions also arise regarding companies. Households provide 37% of public revenue through income tax and 22% through VAT. Companies account for only a quarter of revenues despite a 42% increase in profits between 2020 and 2024. The official corporate tax rate is around 24%, but the effective rate paid can fall between 1% and 8% thanks to available optimization mechanisms.

These imbalances have concrete consequences. The housing crisis is the most visible example: prices, adjusted for inflation, remain 50% higher than in 2010, and the housing cost burden for tenants rose from 31.8% to 39.3% between 2016 and 2023. For low-income households, more than half of their income is absorbed by housing. Meanwhile, up to 20,000 housing units remain vacant, and nearly half of buildable land held by private individuals belongs to the 1,000 largest owners.

The debate is not about punitive taxation but about a reasoned rebalancing. The state needs these revenues to finance its social model. The sustainability of this model depends on a fair contribution from all economic actors.

This is why the Chamber of employees is calling for greater tax justice: increased taxation of capital and wealth, reduction of unjustified tax loopholes, and the removal of certain tax privileges – for genuine tax fairness that would make it possible to fund the social model.