Fiscal harmony

Earning a living as an employee is also synonymous with income tax, which is taxed progressively, generally between 20% and 30% in Luxembourg, depending on your family situation, and so on. But if you invest the same amount in shares, bonds or funds, the tax burden is much lower. Dylan Theis, economic adviser at Improof, the think tank of the Chamber of Employees, believes that the government is being more lenient with the financially independent. The "Luxembourg wealth study" shows that the richest 10% of households own more than 90% of the country's investments. An unequal concentration, according to the advisor: "These figures have remained stable over recent years, at a high level. These inequalities are not found with other types of wealth, such as property. There is a real imbalance between the tax levied on employees and on capital income. While dividends are taxed at around 4%, salaries are taxed at around 30%, and funds and shares are not taxed after 6 months, which is a desire on the part of the government to encourage this type of investment."

But the problem for Dylan Theis is that it is the wealthiest households that have the greatest access to these investments: "This is a population that can afford to take risks." And they know how to take advantage of tax-free investments, whereas employees have little room for manoeuvre with the tax authorities: "There's very little to deduct when you're an employee." In his view, these types of assets, concentrated in the hands of a few, accentuate inequalities. Over and above the psychological barriers linked to risk, with fairly high charges for small portfolios and returns that are not very attractive, "we can see that financial assets remain in the hands of a minority. In 2018, 18.3% of households had access to this type of asset, rising to 34.6% in 2021. This represents an increase, but the truly large portfolios remain in the minority. Average financial wealth in Luxembourg is €2.7 million for the 5% of households that have 82% of the assets."