Editing Economy of Luxembourg (section)

=== The financial center ===

==== Banking ====
[[File:Euro banknotes 2002.png|left|thumb|Luxembourg has been part of the [[eurozone]] since 1999.]]
Banking is the largest sector in the Luxembourg economy. In the 2019 [[Global Financial Centres Index]], Luxembourg was ranked as having the 25th most competitive financial center in the world, and third most competitive in Europe after [[Economy of London#Financial services|London]] and [[Zürich#Economy|Zürich]].<ref>{{cite web|url=http://www.longfinance.net/images/gfci/gfci_21.pdf|archive-url=https://web.archive.org/web/20170611000617/http://www.longfinance.net/images/gfci/gfci_21.pdf|url-status=dead|archive-date=2017-06-11|title=The Global Financial Centres Index 21|date=March 2017|publisher=Long Finance}}</ref> The country has specialised in the cross-border [[fund administration]] business. As Luxembourg's domestic market is relatively small, the country's financial centre is predominantly international. At the end of March 2009, there were 152 banks in Luxembourg, with over 27,000 employees. Political stability, good communications, easy access to other European centres, skilled multilingual staff, a tradition of banking secrecy and cross-border financial expertise have all contributed to the growth of the financial sector. These factors have contributed to a [[Corruption Perceptions Index]] of 8.3 and a DAW Index ranking of 10 in 2012; the latter the highest in Europe.<ref>Transparency International, 2008</ref> Germany accounts for the largest-single grouping of banks, with [[Scandinavia]]n, Japanese, and major US banks also heavily represented. Total assets exceeded €929 billion at the end of 2008. More than 9,000 holding companies are established in Luxembourg. The [[European Investment Bank]]—the financial institution of the [[European Union]]—is also located there.

Luxembourg enterprises expected negative investment in 2023 due to slowing economic growth and tighter monetary policy. The net balance of enterprises anticipating an increase in investment minus those expecting a fall is negative at -4%, far lower than the EU average of 14%.<ref>{{Cite book |last=Bank |first=European Investment |url=https://www.eib.org/en/publications/20230340-econ-eibis-2023-luxembourg |title=EIB Investment Survey 2023 - Luxembourg overview |date=2024-01-31 |publisher=European Investment Bank |isbn=978-92-861-5673-1 |language=EN}}</ref>

==== Holdings ====
Since the Holding Act of 1929, Luxembourg has been an attractive location for [[tax avoidance]].<ref name=":0">{{Cite journal |last1=Calabrese |first1=Matteo |last2=Majerus |first2=Benoît |date=2023 |title=Archaeology of a Treasure Island: Actors and Practices of Holding Companies in Luxembourg (1929–1940) |url=https://www.cambridge.org/core/journals/contemporary-european-history/article/archaeology-of-a-treasure-island-actors-and-practices-of-holding-companies-in-luxembourg-19291940/C425D2D9D2569A1C2A869148FA428932 |journal=Contemporary European History |language=en |pages= 1–18|doi=10.1017/S0960777323000437 |issn=0960-7773|doi-access=free }}</ref> A network of lawyers, bankers and political elites have since then maintained an infrastructure of regulatory codes, legal expertise and shell companies that enable tax avoidance.<ref name=":1">{{Cite journal |last1=Calabrese |first1=Matteo |last2=Majerus |first2=Benoît |date=2023 |title=Archaeology of a Treasure Island: Actors and Practices of Holding Companies in Luxembourg (1929–1940) |url=https://www.cambridge.org/core/journals/contemporary-european-history/article/archaeology-of-a-treasure-island-actors-and-practices-of-holding-companies-in-luxembourg-19291940/C425D2D9D2569A1C2A869148FA428932 |journal=Contemporary European History |pages=1–18 |language=en |doi=10.1017/S0960777323000437 |issn=0960-7773|doi-access=free }}</ref> Concern about Luxembourg's banking secrecy laws, and its reputation as a tax haven, led in April 2009 to it being added to a "grey list" of nations with questionable banking arrangements by the G20,<ref>{{Cite news |date=2011-11-08 |title=Country profile: Luxembourg |language=en-GB |work=BBC |url=http://news.bbc.co.uk/2/hi/europe/country_profiles/1061821.stm |access-date=2018-12-31}}</ref> a list from which it was removed in 2009.<ref>{{cite news |date=29 July 2009 |title=Luxembourg and Belgium removed from 'grey list' |newspaper=European voice |url=http://www.europeanvoice.com/article/imported/luxembourg-and-belgium-removed-from-grey-list-/65629.aspx}}</ref> This concern has led Luxembourg to modify its tax legislation to avoid conflict with the tax authorities of European Union Members. For example, the classic tax exempt 1929 Holding Company was outlawed 31 December 2010, as it was deemed an illegal state aid by the European Commission.<ref>Luxembourg Company Registration [http://www.healyconsultants.com/company-incorporation/luxembourg-company-formation.html Healy Consultants] Retrieved 3 September 2013.</ref>

Nearly 90 percent of companies operating in Luxembourg are foreign.<ref name=":4" /> Approximately 40 percent of Luxembourg companies do not engage in any meaningful economic activity in Luxembourg: they just hold assets in Luxembourg.<ref name=":4" />

===== The early beginnings of the financial center =====
Contrary to the belief of a large number of national historians, the financial center of Luxembourg was not a product that simply saw success out of nowhere in the 70s.<ref>{{Cite journal |last1=Majerus |first1=Benoît |last2=Zenner |first2=Benjamin |date=2020-07-03 |title=Too small to be of interest, too large to grasp? Histories of the Luxembourg financial centre |url=https://www.tandfonline.com/doi/full/10.1080/13507486.2020.1751587 |journal=European Review of History: Revue européenne d'histoire |language=en |volume=27 |issue=4 |pages=548–562 |doi=10.1080/13507486.2020.1751587 |s2cid=219469008 |issn=1350-7486}}</ref> In their article, Calabrese and Majerus argue that the Holding Law of 1929 (H29) was more than just a historical side note, but rather a foundation that laid the future of the country’s financial success. In essence the law was a legal tool that would help companies in avoiding [[double taxation]] on [[financial asset]]s,<ref name=":0" /> mainly by creating a [[dummy corporation]]s and profiting from the [[Tax haven|low taxes]] the country offered for these kinds of companies. The newly introduced Holding regime was successful. Within a span of three years, the capital estimations for the [[Holding company|holding companies]] not only met but exceeded expectations, reaching a total surpassing 2 billion [[Luxembourg franc]]s.<ref name=":1" /> Among the biggest holdings was The Ford Investment Company set up in early 1930. The Holding, enabled by the legislation, could avoid UK tax on the [[Dividend tax|dividends]] of its [[Subsidiary|subsidiary companies]] in Europe. This type of company could however, also be used to loan money or make investments, like in the case of [[Ford Motor Company|Ford]] by buying factories for European [[subsidiaries]] for example.<ref name=":1" /> The Law was accompanied by the creation of the [[Luxembourg Stock Exchange]] a year earlier, which would constitute another important institution to round off the construction of a national financial center.<ref>{{Cite book |last=Haag |first=Emile |title=The Rise of Luxembourg from Independence to Success: 1815-2015 - A Historical Portrait - Two hundred years of modern Luxembourg history |date=2015-06-11 |publisher=Editions Saint - Paul |isbn=978-2-87963-980-2 |location=Luxembourg |language=English}}</ref> In the interwar period, the role these [[Holding company|Holding]] companies played as a source of revenue started to materialize. While the discussions on the adoption of the Holding Law saw opposition members argue against it,<ref name=":0" /> discussions on later modifications on the Law would not see a strong opposition anymore due to its contribution to the state’s [[tax revenue]]s.

H29 also enabled the creation of networks and practices. Following its implementation, Luxembourg experienced the establishment of a network involving [[lawyer]]s, [[bank]]s, and [[Notary|notaries]] closely associated with the local political elite. This network successfully developed and maintained an infrastructure comprising regulatory codes, legal expertise, and [[Shell corporation|shell companies]], rendering it appealing within the European market for [[tax avoidance]].<ref name=":1" /> Additionally, H29 majorly contributed to the establishment of a [[legal framework]] that would pave the way for the future use of [[investment fund]]s,<ref name=":0" /> by establishing a positive reputation among [[investor]]s and proving itself to be a competent key-player on the market. As a result, Luxembourg was chosen in 1963 to list the first and a large part of the [[Eurobond (external bond)|Eurobonds]] on the [[Luxembourg Stock Exchange]],<ref>{{Cite journal |last=Zenner |first=Benjamin |date=2021-01-05 |title=Banco Ambrosiano : les sociétés holding et la place financière luxembourgeoise entre scandalisation et banalisation |url=https://www.cairn.info/revue-entreprises-et-histoire-2020-4-page-88.htm?ref=doi |journal=Entreprises et histoire |volume=101 |issue=4 |pages=88–99 |doi=10.3917/eh.101.0088 |s2cid=234912990 |issn=1161-2770}}</ref>  a choice that only could have been made with the awareness of a [[Financial centre|financial center]] that could keep up with others such as London, which were also used in the case of [[Eurobond (external bond)|Eurobonds]].

Consequently, the Holding Law of 1929 had a large and long lasting impact on the construction of a domestic financial place, an impact that should not be disregarded when presenting the economic history of the country.