In this second edition of the Total Tax Contribution (TTC) survey, PwC Luxembourg, Fedil Business Federation Luxembourg and the Luxembourg Trade Confederation (“Confédération luxembourgeoise du Commerce”) have joined forces to provide a detailed picture of the taxes borne and paid by Luxembourg businesses. The survey targeted 30 major Luxembourg  companies from the country’s main business sectors . The TTC survey was initiated in 2006 and has been conducted in a number of countries, including South Africa, Australia, Belgium, Canada, the United States, India, the Netherlands, the United Kingdom and Switzerland.

TTC methodology: providing a standard approach to assess total tax contribution
The TTC methodology  was created by PwC to provide a standard way of assessing a company’s overall tax burden, including the taxes borne by the company itself and those collected by the company on behalf of the state.

Wim Piot, Tax Leader at PwC Luxembourg, explains: “The TTC methodology is an essential component of PwC’s global effort to strengthen tax transparency and reporting. The survey allows companies to assess their total tax contribution in Luxembourg and enables us to rank the country internationally in terms of type and number of taxes collected.”

An average effective tax rate
According to the survey, Luxembourg companies can be liable to 31 different types of taxes, including 18 “borne ” taxes and 13 “collected ” taxes. The main taxes borne by Luxembourg companies include employer social security contributions (44%) and profit taxes (42%), which comprise Corporate Income Tax and Municipal Business Tax. In contrast, the main types of taxes collected by companies on behalf of the state include withholding taxes, employee social security contributions and VAT, which account for a large portion of total government revenue.

Among the 31 types of taxes which can be levied on Luxembourg companies, the survey respondents were subject to 12.9 taxes on average, placing Luxembourg in a good position compared to the other countries having also conducted the survey. In this respect, Australia recorded the lowest average number of taxes borne and collected by companies (9), whereas Switzerland counted the highest number of taxes (28).

On average, the total tax contribution of respondent companies in Luxembourg accounted for 14% of their turnover. This places Luxembourg in fourth place behind Japan (5%), the United States and Switzerland (tied at 11%). This percentage takes into account the taxes collected and the taxes borne by each company.
Finally, the effective tax burden  of Luxembourg respondents stood at 24% on average; this was followed by Switzerland (25.8%), Canada (27.6%) and the Netherlands (31%).

Staying on course
Despite the crisis affecting Luxembourg’s financial centre, the stability and resilience of Luxembourg’s political, fiscal and legal environment have allowed the country to remain an attractive location in which to set up or invest. It is therefore crucial that Luxembourg stays on course to maintain its competitive edge. To this end, companies must be able to openly communicate what they contribute in real terms to the Luxembourg economy.

Download the full report here.