Luxembourg understands business. Leading glass manufacturer Guardian Industries has been in the Grand Duchy since 1981 and currently employs 1,200 people. When asked why, the company's late owner/CEO Bill Davidson offered a simple explanation: "Luxembourg works". They are just one example of several multinational businesses which use the Grand Duchy for high-tech production, R&D and their European administrative headquarters.
Its diminutive size has compelled Luxembourg to look outward. Not only do children leave school at least speaking excellent French, German, English and Luxembourgish, but the country is a magnet for talent. Over 44% of the resident population are foreigners and over 40% of the workforce commutes into the country each day. These foreigners are more likely to have higher education qualifications than the European average. Interesting are also the country’s efforts to enlarge its university which focuses on post-graduate educational programmes and to further develop public research centres. These projects are boosting the skills of locals and attracting knowledge-workers from around the world.
New laws on immigration and double nationality will spur this process. Since the reform in October 2008, the process for acquiring work and residence permits has been streamlined, with skilled people and researchers now finding it easier to start work and intra-company transfers have also been greatly facilitated. Expatriate families can also find schooling for their children in their mother tongues with a range of first-class international schools, including two dedicated to English.
The Luxembourg government is able to build close relationships with employers and wealth creators. The Government and civil service are keen to understand the challenges faced by business and are quick to adapt. Social charges are low, meaning that despite above-average salaries, total employment costs are well below those of neighbouring countries. And at the heart of the economy is the “tripartite” system where government, employers and unions can discuss important issues and move forward in consensus.
Added to this, infrastructure spending is high and taxes are low. Corporation taxes are moderate and are levied with flexibility. Value-added tax is the lowest in the EU and supplementary employment costs are amongst the lowest in the EU. For example, a recent PwC survey showed a married couple with two children could expect to receive 72% of their gross salary at a total cost of 111% to the employer. This compared to 68%/112% in the UK, 58%/111% in Germany and 48%/149% in France.
Finally, Luxembourg's size and its easy access to neighbouring markets keep consumer prices in check, meaning that with high take-home salaries the purchasing power of residents is one of the highest in Europe.