Public finance in Luxembourg

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1 Public finance in Luxembourg Overview of the Luxembourg Budgeting System Version 1.0 igf.etat.lu 32nd Annual Meeting of OECD Senior Budget Officials Luxembourg, 6 June 2011

2 National Motto Mir wölle bleiwe wat mir sin

3 National Motto Mir wölle bleiwe wat mir sin We want to remain what we are

4 What we are : Innovative

5 What we are : Innovative in Steel

6 What we are : Innovative in Steel Finance

7 What we are : Innovative in Steel Finance Satellites

8 What we are : Innovative in Steel Finance Satellites Other

9 What we are : Innovative International

10 What we are : Innovative International Small, but beautiful

11 What we are : Innovative International Small, but beautiful

12 Public Finance in Luxembourg The current state Some figures Public sector organization Public finance Budget implementation 5 budget principles Exceptions Fiscal rules Reform Guidelines 07/06/2011 Inspection générale des Finances Ministère des Finances, Luxembourg 12

13 Some general figures From OECD Factbook 2010 OECD Total Luxembourg Area km ^ km ^ 2 Population (2007) Growth rate: Foreign population as % of total population GDP (2008) GDP per capita Added Value (Agr, Ind, Serv) ,68% n.a. $ ,5 Billion $ ,56% 43,2% $ 41,40 Billion $ A: 0,3% I: 15,4% S: 84,3% 07/06/2011 Inspection générale des Finances Ministère des Finances, Luxembourg 13

14 Government net lending, as a percentage of GDP Source: OECD Economic Outlook 88 database Luxembourg Euro area (14 countries) OECD - Total

15 These figures take into account an exceptional 2 Billion EUR loan invested in two banks in 2008 (about 5% of GDP) Source: Trésorerie de l Etat du Grand-Duché du Luxembourg

16 Public sector organization Administrative subdivisions of Luxembourg: 3 districts, 12 cantons, 116 municipalities Ministries, administrations, public institutions, associations Parliament (Chamber of Deputies) Court of Accounts General Inspectorate of Finance an administration of the Ministry of Finance 07/06/2011 Inspection générale des Finances Ministère des Finances, Luxembourg 16

17 Public finances They include central governement finance, municipality finance and social security finance One annual law provides annual permits for all revenues and all expenditures The revenues are linked to the budget exercice where they are received The expenditures are linked to the budget exercice where a commitment has been made 07/06/2011 Inspection générale des Finances Ministère des Finances, Luxembourg 17

18 Proposal of a commitment 1. Control Commitment/ Order Receipt of the object or service Invoice Decision of the payment 2. Control Payment

19 5 budget principles Principles of unity, annuality and universality Principle of non-earmarking of the revenues Principle of specification of the expenditures 07/06/2011 Inspection générale des Finances Ministère des Finances, Luxembourg 19

20 Exceptions Some budget line are irrespective of the budget exercises unlimited (an overrun may be authorized by the Minister of Finance) some transfers are possible Special Acts (projects> 40 million euros) Special Funds Services with separate management 07/06/2011 Inspection générale des Finances Ministère des Finances, Luxembourg 20

21 Fiscal rules Each public loan must be authorized by a law stating the purpose (eg Rails Fund) The municipalities may use a loan to balance their capital budget provided, however, the regular budget margins must be sufficient to repay the loan (section 118 of the Municipal Act) Fiscal rules (set by law) specify the public financial contribution to Social Security The Government Programme (see next page) Speech on the State of the Nation: "The government will continue its policy of savings to ensure that public finances - with their three components, central government, municipalities and social security systems - are in balance in 2014" Annual budget circular (eg -10% in expert fees) 07/06/2011 Inspection générale des Finances Ministère des Finances, Luxembourg 21

22 Excerpt from the Government Program Public Finance Compliance with the objectives of the Stability and Growth Pact of the European Union. an anti-cyclical finance policy the Government will seek to avoid, at the end of the program for economic recovery, growth in government spending that exceeds the economic growth in the medium term. maintain capital spending at a high level inhibit the growth of spending on social transfers by introducing more social selectivity review the subsidies and tax breaks on their purpose and fiscal and social impact limit the growth in operating expenses of the State avoid new measures having a significant impact on the growth of government spending do not increase Taxation of individuals during the economic crisis maintain a competitive tax environment for business taxation. 07/06/2011 Inspection générale des Finances Ministère des Finances, Luxembourg 22

23 Reform In a dual concern for modernization of government operations and efficiency of public spending, the Government will examine ways to improve the process of elaboration, implementation and evaluation of the budget. (Excerpt of the Government Program ) 07/06/2011 Inspection générale des Finances Ministère des Finances, Luxembourg 23

24 What we are : Innovative International Small, but beautiful

Budget Reform in Luxembourg

Budget Reform in Luxembourg Overview of the Preparations Version 1.0 Raymond.Bausch@igf.etat.lu 33nd Annual Meeting of OECD Senior Budget Officials Reykjavik, 8 June 2012 Budget reform in Luxembourg Some