Luxembourg

	Score	Rank
Financial Standards Index	49.17 out of 100	39
Business Indicator Index	10.98 out of 12	12

Business Indicators Summary

With an overall score of 10.98/12, Luxembourg is at standard on the economic, legal, and political indicators that make up our Business Index. Luxembourg has a market-based economy, led by export intensives. The government oversees Europe's most generous welfare program while the highly specialized economy is run by the private sector. Both residents and non-residents are entitled to foreign exchange accounts, and there are no restrictions on capital transactions, current transfers, repatriation of profits, purchase of real estate, and access to foreign exchange. There is equal treatment for both foreign and domestic investors, but branches of banks outside Europe must be licensed and investments in industries related to national sector are restricted. Because the country imposes relatively low effective corporate tax rates as well as some of the lowest individual income tax rates, Luxembourg is considered to be a very attractive tax location for doing business. The country also adheres to key international agreements on intellectual property rights and protects intellectual property, patents, copyrights, trademarks, and trade secrets. Luxembourg, regarded as one of the most politically stable country in the world, is a constitutional monarchy with a parliamentary form of government, where the head of the state is the Grand Duke and the head of the government is the Prime Minister. Corruption is of no concern in Luxembourg, since the country has effective corruption laws and regulations that are enforced equally on foreign and domestic investors.

Business Indicators

Economic Model
Forex Regulations
- Capital Controls
- Exchange Controls
Foreign Investment Law
Trade Regulation
Tax Regime
Tax Rates
Bankruptcy Indicators
International Dispute Settlement
Political Environment
Political Stability
Corruption
Adherence to global labor standards

Economic ModelMarket-based economy

The 2009 Economic Freedom of the World Annual Report by Gwartney et al. calculates a score of 8 (out of 10, with a higher value signifying greater economic freedom) for the factor "Government Enterprises and Investment" as a percentage of total investment for Luxembourg. A score of 8 is assigned to countries which have few State-Operated Enterprises (other than in industries where economies of scale reduce the effectiveness of competition) and government investment is between 15 and 20 percent.

The 2009 Heritage Foundation’s Index of Economic Freedom indicates that total government expenditure, including consumption and transfer payments, represents 39 percent of the country’s GDP. The government oversees Europe's most generous welfare program while the highly specialized economy is run by the private sector.

The 2009 U.S. Department of State report notes that Luxembourg's economy is an export-intensive one. In 2005, the services sector, which is comprised significantly of financial services, represented 83.3 percent of the country's GDP and 78 percent of the employed workforce.

The International Monetary Fund (IMF) notes, in its 2009 Article IV Consultation report, that Real GDP growth has been revised down to -0.9 percent for 2008 and -5.3 percent for 2009. In the same report, the IMF stressed that far-reaching reforms of the public, pay-as-you-go pension system remain overdue, given that significant funding gaps continue to threaten its long-term viability.

Sources

Gwartney, J., et al., "Economic Freedom of the World - 2009 Annual Report," September 2009. Available from Frazer Institute website. Accessed on October 19, 2009. (Gwartney et al. 2009)
Link

Heritage Foundation, "2009 Index of Economic Freedom," 2009. Available from Heritage Foundation website. Accessed on October 19, 2009. (HF 2009)
Link

International Monetary Fund, "Luxembourg: 2009 Article IV Consultation--Staff Report; Staff Statement; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Luxembourg," Country Report No. 09/178, Washington, D.C: IMF, June 2009. Available from International Monetary Fund website. Accessed on October 19, 2009. (IMF 2009)
Link

U.S. Department of State, "Background Note: Luxembourg," May 2009. Available from U.S. Department of State website. Accessed on October 19, 2009. (U.S. DoS 2009)
Link