Luxembourg Unitary state

History and trends

Luxembourg is a constitutional parliamentary Monarchy. Its Constitution was adopted on 18 October 1868, and was substantially revised in July 1956.

Luxembourg has just one tier of local government, meaning that there is no intermediary level between the municipalities and the state. The local government landscape is organised according to the constitution of October 1868, supplemented by a fundamental law of December 1988.

Local level :

Since 2015, Luxembourg has been divided into 12 cantons and 105 municipalities, each with an elected council. Previously, there were 118 municipalities grouped into three districts, which are nothing more than central government administrative divisions. The districts are led by district commissioners who represent central government and report to the Ministry of the Interior.

The municipalities have general jurisdiction. Their remit includes water supply, local road maintenance, nursery and primary education, theatres and sports institutions, social care and waste collection.

The entry into force of the Benelux Convention on 1 April 1991 gave Luxembourg’s municipalities significant freedom to cooperate with municipalities in Belgium and the Netherlands, including the option to set up joint public bodies.

The districts are responsible, among other things, for enforcing compliance with municipal laws and regulations, ensuring proper administration of municipal property and revenues, and scrutinising municipal budgets and accounts. The district commissioners may, at their discretion, ask to attend municipal council sessions.

The state has the power to create, amend or abolish municipal taxes. The municipal councils nevertheless have significant latitude to set the municipal tax base and rate as they see fit. Municipal budgets account for slightly more than one-quarter of total public spending in Luxembourg.

Generally speaking, the municipalities enjoy significant freedom because two-thirds of their resources come in the form of unrestricted revenues – primarily municipal business taxes and land taxes (both of which are collected directly by the communes following equalisation) and resources from the Municipal Finance Fund (FCDF). Specific subsidies only make up a small proportion of their resources.

In addition to tax revenues, the municipalities also levy taxes on services. In 2001, direct taxes and other levies accounted for around half of total municipal funding in Luxembourg.

Inter-municipal cooperation gained traction towards the end of the 20th century. Municipalities have the option to join syndicates that possess legal personality. In 2002, there were 68 such syndicates, and the number has been rising steadily for many years. Creation of a syndicate is subject to approval by Grand-Ducal decree. The underlying legal framework was overhauled in 2001. Since 1981, municipalities have been authorised to hold financial stakes in private companies, subject to approval by the state.

The state’s supervisory powers were trimmed dramatically in 1988. The constitution was amended to create a local government oversight system led by the Grand Duke, the Minister of the Interior and, on many everyday affairs, by the district commissioners (under the government’s authority). Although prior supervision was abolished, the system is still relatively restrictive for municipalities.

In 1995, the government floated the idea of sweeping administrative reforms, including changes to the roles and powers of the state and municipalities and options to address the piling up of existing legislation. These questions are still under consideration.

In recent years, however, there have been growing calls in Luxembourg for some municipalities to be merged – especially those with fewer than 3,000 inhabitants.