Here’s how taxing singles at the same rate as couples could make a difference to startups struggling to hire talent.
Lucas de Lara moved to Luxembourg in 2021 after discovering his family had Luxembourg heritage. A graduate in multimedia design, in 2022 he landed his dream job working for a startup.
“I love my job. I love Luxembourg and I want to be here but also I don’t want to be sharing an apartment with three or four other people that I don’t really know,” the 23-year-old told Silicon Luxembourg, adding: “I want to have my own place but that comes at a high price.”
de Lara is one of thousands of young professionals who begin their careers alone in Luxembourg. While he has a competitive salary, the professional is still paying up to 35% of his net monthly income to rent a shared, two-bedroom apartment in Luxembourg City.
In 2022, the average rent for an apartment in Luxembourg City was €1,539 per month, a new record according to CBRE, a real estate consultancy firm. Some expats and Luxembourgers are moving out of the city or over the borders to get more bang for their buck. But, de Lara doesn’t want to add a long commute to his day.
Unequal tax treatment
One thing that could make a difference for single professionals like de Lara would be if they were to pay the same rate of taxes as married or couples in a civil partnership (PACS).
“I know people that are PACSd because it simply makes financial sense. It’s wrong. But the system simply is not supportive towards single people,” he said.
Under Luxembourg’s fiscal regime, individuals who are married or PACsd may be eligible to claim back money on the taxes that were paid on their earnings by submitting a declaration. If earning a gross monthly income of €5,400, they would receive roughly €4,433 net. However, an individual earning the same monthly gross would receive roughly €3,791, according to Silicon Luxembourg’s calculations, a difference of €642.
Startups Attractiveness
The idea proved popular with signatories of an online petition which, within two weeks of opening, received more than double the number of signatures required to prompt a debate in parliament. The petition author writes: “There is a form of injustice that deserves to be re-examined and discussed again in parliament. Particularly at the present time with inflation continuing to rise and despite the different indices planned for this year.”
And a reform wouldn’t only make a difference to employees. According to the 2022 Silicon Luxembourg survey of Luxembourg startup founders, almost all respondents plan to recruit in 2023 and create 1-5 jobs. While the latest Global Talent Competitiveness Index from Insead ranked Luxembourg best for talent attractiveness, in the Silicon Luxembourg survey the most common challenge cited by founders was hiring skilled talent.
The Luxembourg Startups Association sees fiscal reform as an important piece of the puzzle for improving the country’s attractiveness for talent and growing startups.
“Luxembourg’s growth depends to a large extent on its ability to attract new talent from abroad,” the association writes in its manifesto, adding: “It is much easier for a single person to decide to relocate to Luxembourg than for a family with children.”
It goes even further than calling for equal taxation and recommends a raft of advantages for single people moving to Luxembourg on a permanent contract. These include a direct tax advantage; housing benefits and other indirect aid. Startups.lu recommends the advantages be offered for up to five years.
