Double taxation

Luxembourg City, Luxembourg — One of the biggest hindrances to Luxembourg businessmen who are interested in doing business in the Philippines is the issue of double taxation. Compared to its ASEAN neighbors, the Philippines has one of the highest tax rates, which could make it an unattractive investment destination according to economists. Double taxation simply means a business entity (or individual) is taxed twice for the same source of income so one could just imagine the high cost this practice (or principle) will take on businesses. The Philippines though has existing tax treaties with several countries such as the United States, UK, Canada, China and several others, but unfortunately, Luxembourg is not one of these countries.

Another issue that makes it difficult for foreign businessmen to invest would be the bureaucratic red tape and the outdated regulations that continue to exist, making it difficult for foreigners to do business in the Philippines. In fact, the recently created National Competitiveness Council (NCC) has admitted they are looking at a total 22,000 unnecessary laws that need to be repealed, with the removal of 5,000 targeted by the end of this year. Much earlier, some 3,700 outmoded regulations have been removed.

During my meeting with Honorary Consul General of the Philippines in Luxembourg Alain Kinsch (in photo) and arranged by the Luxembourg Ministry of Foreign and European Affairs, we both agreed there are a lot of business opportunities that both Luxembourg and the Philippines can engage in, such as information and communications technology.

The telecoms industry in Luxembourg is thriving, with liberalization spurring competition between players. The government has embarked on a strategy to make Luxembourg a global leader in terms of high-speed broadband networks by 2020, and it won’t be surprising if it will achieve its target way before its deadline considering that in 2013, Luxembourg had the sixth highest download speed worldwide and the second highest in Europe. Aside from its location, one of the reasons why the small European nation is very attractive to IT players is its stable economy and low tax rates.

Kinsch suggested the Luxembourg Finance Minister hook up with Finance Secretary Sonny Dominguez during the annual meeting of the International Monetary Fund and the World Bank in Washington DC this coming week to initiate discussions about the issue of double taxation and enhancing economic ties between the Philippines and Luxembourg.

Consul General Kinsch — who speaks German, French and English aside from Luxembourgish — is also the country managing partner of Ernst & Young Luxembourg, a member of the Luxembourg State Council, and is on the board of the University of Luxembourg. In fact, he was a candidate for the post of Finance Minister, and has been actively promoting the Philippines as an attractive investment destination. He is a personal friend of the Grand Duke of Luxembourg.

During the Philippine Independence Day celebration in Luxembourg, Kinsch spoke about the close ties that have been developed in the last 70 years, with formal diplomatic relations established in 1946. (In 2013, then-Foreign Secretary Albert del Rosario visited Luxembourg to renew bilateral ties and boost trade and investment relations.) Former Philippine ambassador to Belgium Victoria Bataclan, who recently retired, also expressed hope the Luxembourg government officials and business leaders would send another delegation to the Philippines similar to what the Luxembourg Chamber of Commerce initiated in November last year.

Aside from meetings with the Foreign and European Affairs Ministry’s Legal and Cultural Affairs director Carlo Krieger and political affairs director Jean Olinger, I also had discussions with David Lutty and Gery Vandewalle of the Jan De Nul Group, the global leader when it comes to dredging and reclamation. Established in Belgium by the Jan De Nul family in 1938, the company’s financial headquarters is located in Capellen, Luxembourg.

Over the years, Jan De Nul has also become well known in the area of maritime infrastructure and specialized services for the offshore industry (oil, gas and renewable energy). In fact, it is recognized for its reclamation work on the Palm Island Jebel Ali project in Dubai and the Chek Lap Kok Airport in Hong Kong. The company has close to 5,000 employees with presence in many parts of the world including the Philippines. Its state-of-the-art fleet of dredgers and specialized auxiliary equipment make it unrivaled in the field of dredging and reclamation.

Jan De Nul was chosen by the SM Group to undertake the massive reclamation of its 600-hectare, P100-billion integrated development project in Pasay and Parañaque — although the company has yet to get the final approval for the project that has been stalled during the previous administration. According to the SM group, the massive reclamation project will take up to five years for the reclamation alone.

Jan De Nul is also looking at San Miguel’s proposed airport project in Bulacan — something that has long been in the pipeline and which could go a long way in helping decongest NAIA, where flight delays and cancellations can make it a nightmare for people to travel. Company officials plan to meet with SMC president and COO Ramon Ang very soon.

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