Luxembourg, as a Grand Duchy, has traditionally been a strong proponent of European political and economic unity. The Belgium-Luxembourg Economic Union (BLEU) was founded in 1921 by Luxembourg and Belgium to develop an inter-exchangeable currency and a uniform customs system. Following WWII, Luxembourg became a founding member of the United Nations and abandoned its policy of neutrality to join NATO as a founder member. Luxembourg strengthened its commitment to European integration by becoming a founding member of the Benelux Economic Union (now the Benelux Union) and one of the “inner six” founding members consisting of the three European Communities: the European Coal and Steel Community (ECSC), the European Atomic Energy Community (Euratom), and the European Economic Community (EEC) (EEC).
When the EEC and ECSC were integrated into the European Union (EU) in 1993, Luxembourg became a founding member state. The Schengen Area, named after the Luxembourg municipality where the original accord — now incorporated into EU legislation — was signed in 1985, is a founding member, removing internal boundaries among its member states. At the same time, the majority of Luxembourgers have always considered that European unification can only be achieved in the context of a strong transatlantic link, and have thus generally supported a pro-NATO, pro-US foreign policy.
The European Court of Justice, the European Investment Bank, the European Court of Auditors, the European Parliament’s secretariat, the European Commission’s Statistical Office (Eurostat), and other EU entities are all based in Luxembourg.
OECD
The Organisation for Economic Co-operation and Development (OECD) is a 38-country intergovernmental economic organization formed in 1961 to promote economic advancement and global trade. It serves as a forum for democratic and market-oriented countries to share policy experiences, explore solutions to common problems, identify best practices, and coordinate their domestic and international policies. The OECD’s membership is overwhelmingly composed of industrialized countries with advanced economies and a high Human Development Index (HDI).
The Organization for Economic Cooperation and Development (OECD) publishes and updates a model tax convention that acts as a guide for governments to assign taxation rights. This model is annotated to reflect the OECD’s interpretations of the model convention provisions’ substance. In general, this method grants main taxation authority to the country from which capital investment originates (i.e., the home or resident country), rather than to the country where the investment is made (the host, or source country). As a result, it works best when two countries have reciprocal investment flows (like the OECD member countries), but it can become unbalanced when one of the signatory countries is economically deficient in comparison to the other (such as between OECD and non-OECD pairings).
