On an average gross annual income of €64,932, a couple without children will be taxed at 8.16% in 2021, while this rate rises to 19.75% for a single-parent family.
On the one hand, the couple is in tax class 2, while on the other hand, the parent with a dependent child is in class 1a. Between the two, the difference in taxes amounts to €7,158, i.e., a 142% difference, claims Collectif Monoparental in a calculation attached to an open letter addressed to prime minister Bettel in the beginning of July.
We have the feeling that the government is hiding behind the covid crisis.
“We have already met with Pierre Gramegna, minister of finance, just before the tax reform of 2017, we want to talk to prime minister Xavier Bettel because we have the feeling that the government is now hiding behind the covid crisis, and I find that this is not serious”, says Jean Heuschling, long-time member of Collectif Monoparental.
Heuschling sees this as a “tax injustice” of single-parent households. “They are subject to a tax regime that is visibly more burdensome than for a couple without children, even though they have only one source of income and are immediately exposed to an increased risk of poverty,” he says.
Last April, economic organisation OECD once again highlighted another major tax gap in Luxembourg–that between married couples and single people, with the latter being taxed twice as much.
A tax credit that does not make the grade
It should be noted that for a single-parent family the shift to class 1a takes place two years after the divorce. In addition to that, the 2017 tax reform led to an increase in tax credits for single-parent households (CIM).
But in the gross income scenario of €64,932 presented by Collectif Monoparental the tax credit amounts to €1,257, plus €3,780 in child benefits. The net annual income is €50,557, which is €2,121 less than those in class 2.
“The doubling of the single-parent tax credit has only been beneficial in theory and for a tiny portion of the families concerned, while it has been made subject to an additional restrictions,” the collective writes.
To benefit from the CIM, taxpayers have to fill in a tax return. However, “many single-parent households have such low incomes that they do not file a tax return”, explains Heuschling. Collectif Monoparental tries to inform its members about their rights.
“Our main goal is to bring the taxation of single parents to at least the same level as that of families who pay much less tax,” says Heuschling.