Download - Overview of the Luxembourg Budgeting System
Public finance in Luxembourg
Overview
of the
Luxembourg Budgeting System
Version 1.0
Raymond.Bausch @ igf.etat.lu
32nd Annual Meeting of OECD Senior Budget Officials
Luxembourg, 6 June 2011
Public Finance in Luxembourg
• The current state – Some figures
– Public sector organization
– Public finance
– Budget implementation
– 5 budget principles
– Exceptions
– Fiscal rules
• Reform – Guidelines
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Some general figures From OECD Factbook 2010
OECD Total Luxembourg
Area 35.830.000 km ^ 2 2.586 km ^ 2
Population (2007)
Growth rate:
Foreign population as % of total population
1.183.167.000
0,68%
n.a.
480.000
1,56%
43,2%
GDP (2008)
GDP per capita
Added Value (Agr, Ind, Serv)
$ 40.135,5 Billion
$ 33.732
$ 41,40 Billion
$ 84.713
A: 0,3% I: 15,4% S: 84,3%
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Source: OECD Economic Outlook 88 database
Government net lending, as a percentage of GDP
-10
-8
-6
-4
-2
0
2
4
6
8
19951996
19971998
19992000
20012002
20032004
20052006
20072008
20092010
20112012 Luxembourg
Euro area (14 countries)
OECD - Total
Source: Trésorerie de l’Etat du Grand-Duché du Luxembourg
These figures take into account an exceptional 2 Billion EUR loan invested in two banks in 2008 (about 5% of GDP)
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
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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
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Proposal of a commitment
1. Control
2. Control
Commitment/ Order
Receipt of the object or service
Invoice
Decision of the payment
Payment
5 budget principles
• Principles of unity, annuality and universality
• Principle of non-earmarking of the revenues
• Principle of specification of the expenditures
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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
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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 2009-2014 (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)
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Excerpt from the Government Program 2009-2014
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.
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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 2009-2014)
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