Keimpe Reitsma is Honorary Vice-Chairman & Amcham Representative in Cyprus
AmCham: Please tell our audience your professional story both before and including your time in Luxembourg so they know you, and the values that have guided your decision making.
I grew up in the country-side in the Netherlands. My father was mayor of a municipality first in the east of the country, later in the north (and after I had left the house for studies his last posting was in the south of the Netherlands. I was the oldest of four, with three younger sisters. For a number of years the family was augmented with three children of an uncle and aunt who resided in Malaysia but had chosen to have their children follow tuition in the Netherlands.
They always say that one’s youth shapes a person and I know this to be true. When I am (very rarely) back in the area of the country (de Achterhoek) where I lived till the age of 16, my heart rejoices. So I guess it is fair to say that I had a happy youth!
When the family left de Achterhoek to move to the north of the country, Friesland, that was quite a change in all respects. I finished my secondary education there and left for Leiden University where I graduated in tax law.
My first professional experience was at the International Bureau for Fiscal Documentation in Amsterdam, where I found to that I was less suited for academia and wanted to be more grounded in real (business) life so after a short stint at the IBFD I left for one of the precursors of what would become Ernst & Young in the Netherlands in their Rotterdam office. These were very formative years.
As there was no possibility to become partner in EY, I left that organization after 11 years to become tax counsel for the Wealth Management Department of Bank MeesPierson, basically the first step in a voyage that ultimately would lead to Luxembourg. MeesPierson within the Fortis context hit some turbulence in those years leading to staff mutations, my team at that time (International Clients) leaving for Bank Insinger de Beaufort which led to my posting in Luxembourg in September 2005 for Insinger.
How has the attractiveness of Luxembourg changed over the years, both in personal and professional terms?
I have only been working 18 years in Luxembourg, of which 13 years as a resident. To say that the city changed is obvious, think of how Cloche d’Or and Kirchberg developed in that time span!
The question is what you mean by attractiveness. On a personal level I always felt that Luxembourg was a very pleasant place to live, but you have to be able to afford it as it has become an insanely expensive place to live in. It is a fascinating melting pot of European cultures which adds a lot of color to life in Luxembourg.
What I noticed is that to establish true contacts with “locals” is extremely difficult. When I at the time of my secondment asked my boss-to-be (a ” ‘Burger”) what social life was like in Luxembourg, he answered “when I see my neighbor in his garden, I will wave to him, but we will not talk”. Another expat told me at that time that he had had contact with his neighbor only once and that was when “the neighbor’s stupid dog jumped on his driveway and he hit it with his car and subsequently got sued by the neighbor for reckless driving in his own yard”. I had at the time difficulty to accept this bleak picture and it did fortunately not prove to me the whole truth as I was fortunate to meet some “‘burgers” that have become very dear to me. But that took 18 years!
Professionally the country changed a lot. At the time in 2005 there was a bit of a pirate’s mentality. As my boss at the time informed me, it was “a good ‘huisvader’s’ duty to cheat on his taxes”. [Ed. note: huisvader means “man of the house”]. Coming from the Netherlands where the Revenue knows almost everything about someone’s finances, this was quite a shocker for me. We all now know that that “niche” of banking secrecy was not to last after the 2008 and later scandals. Information technology has made the world a lot more transparent, which ultimately (within measure) is a good thing.
As a domiciliation manager for companies using Luxembourg as a headquarters to manage holding across Europe and the world, please comment on the user-friendliness of the Luxembourg tax authorities.
My contacts with the Luxembourg tax authorities have been relatively sparse. Our policy in our company was to almost always have a professional tax adviser do a client’s tax return as we felt it was better to always have an independent set of eyes go over and interpret the figures that we produced. Occasionally I would take up contact with the authorities when e.g. due to extraordinary circumstances, a client could not immediately pay his taxes in time. In my contacts with them I always felt them to be quire reasonable. On the other hand I am also aware of a tax adviser who assisted the tax authorities to correctly interpret the tax return prepared by another corporate services provider and prepared for them the correct return, got punished quite harshly by the authorities for the wrong return prepared by the corporate services provider (and not by him) and had to go to court and subsequently into appeal to rid himself of that. So I guess that here, too, we are talking human beings; some are good, some do not understand what they are doing and the effect it has on “perception”.
How would you rate Luxembourg’s current attractiveness to other competing European or global location?
I think it was Luxembourg’s enormous fortune that thanks to an early start with investment vehicles like the Holding 1929 (which was devised as a pure tax avoidance vehicle through which to attract finance for the Luxembourg steel industry at the time) and subsequent further development of investment vehicles, in combination with an absolute banking secrecy, a center for administered offshore wealth came into being for at the time essentially private clients. Two new elements were introduced into this environment in the 1990s; the tax ruling practice that was cloned from the existing Dutch ruling practice and the introduction of a whole range of regulated and unregulated investment vehicles. They found a fertile soil in the Luxembourg setting with a banking scene that was used to operate internationally (for all their foreign private clients) and an administrative apparatus of corporate services providers.
The savvy way in which the Luxembourg authorities implemented the fund legislation in Luxembourg aided a lot.
As a consequence when the world of private client services diminished greatly due to enhanced transparency and subsequently also the tax ruling practice came crashing down due to the negative publicity caused by the PwC whistleblower, Luxembourg was fortunate to have an economic lifeboat in its fund industry.
That being said, it is the only advantage that I can think of as “real” economic activity seems difficult to develop in Luxembourg (think of IKEA forced 100m across the border, the yogurt factory that could not be realized, and lately Google and Bissen).
But the very niche players of the fund industry (and remaining other areas of the corporate services industry) are very much threatened by the banks in Luxembourg and their compliance attitude as well as risk appetite! Some banks will not even contemplate opening a bank account for this segment, others take multiple months to decide yes or no to open an account. The lack of responsiveness of banks in Luxembourg regarding new projects is a serious threat to the development of the financial place.
I read with lots of appreciation the analyses by Jerome Bloch on LinkedIn, who often is spot-on in his observations. However, I do not have the feeling that this is the way Luxembourg decision makers wish to hear (well-meant criticism), which in itself is very regrettable.
What advice would you give the government concerning steps which you would recommend the government take to further enhance Luxembourg’s attractiveness as a location for international companies?
The number one big weakness of Luxembourg is the banks that have become extremely reluctant to serve new (but also new projects by existing) clients; it all takes too long.
Even if one has a bank account, one is no longer sure to have it tomorrow. This goes for private clients as well as corporates; with a simple reference to the standard clauses (no defense possible, just simply “we do not like you anymore”) one can have his bank account terminated with a couple of months to find an alternative (the grace period being notably shorter than the period it takes with that bank to open an account!).
This is extremely disruptive and very damaging for Luxembourg’s reputation as a financial center. Luckily for the industry there are now good alternatives that have found their niche in this changed financial landscape like COMO/Digital Life that fill the void left by the traditional banks. But I would be a strong proponent of legislation in Luxembourg (like exists in France) that if a person(whether physical or legal) in Luxembourg is unable to open a bank account in Luxembourg, a court will attribute a bank account to that person. In nowadays world, life without a bank account is impossible, projects are impossible, economic activity is impossible! However in Luxembourg it can be exceedingly hard to get (or keep) a bank account! Solving this bottleneck would already greatly help Luxembourg and the government needs to bring parties around the table. I think banks have become so risk adverse that they find it more rewarding not to have to think about new clients anymore. I think that a round table to be organized by the government between representatives of the corporate services industry, the fund industry, the banks and the CSSF how to ensure that banks do not unnecessarily hamper Luxembourg’s development might be a first step. At this point in time banks and CSSF are pointing fingers to each other and nothing moves.
Having come to Luxembourg later in your career and having enjoyed an excellent career in the Grand Duchy, please explain your reasons for not staying as you enter into retirement.
As stated earlier, Luxembourg is a very pleasant country and I thoroughly enjoyed my stay in Luxembourg. But Luxembourg is not the only pleasant country in the world and it has become extremely expensive. I have visited and experienced more countries in my life than Luxembourg, each country having specific pros and cons. Basically it is the price of housing (I always rented in Luxembourg) that made me decide that I will not buy a house in Luxembourg, from there the thought process led to where I live now.
What changes would entice you and your wife to return to Luxembourg?
We are not living in exile ! We are now 6 months in Cyprus (a country I regularly visited over the last 15 years) and love it very much. My wife found a job she loves, I am part-time still professionally active and we live in a large 300m2 house with large garden for half the money that I could have bought my 90m2 apartment without garden for “prix d’ami”. To be honest, the people I loved and cherished when I was in Luxembourg I will visit when I am in Luxembourg, but I do not see myself taking up residence in Luxembourg in the future anymore.
What advice would you give to younger colleagues concerning developing their careers in Luxembourg?
Be curious, inquisitive and patient! Luxembourg as I experienced it is a fascinating melting pot of cultures. I came to Luxembourg thinking that if people did not speak English, they at least would speak German. Big mistake! Due to the majority of the people coming to Luxembourg as frontier from purely French-speaking countries, I found myself in a French-speaking environment, a language that I had been actively forgetting for almost 40 years by then. So I had to get up to speed with French (which took me two years) to be able to function properly.
Four years after we founded our own company, I came to the conclusion that amongst the thirteen staff members, we had nine different nationalities. In such an environment one has always to be mindful that what is normal for you, is not necessarily normal for the other. I being Dutch, was always aware that no matter how circumspect I could try to be (and I am sure I did not always try enough), I always would be much too direct for a francophone. I often apologized for this or joked about it myself. But the one thing that I took with me from Luxembourg is this incredible cross-cultural experience and the friendship with many other nationality people. So to the younger generation: do not assume that your method is the only superior method or will be perceived as such by the other. Try to understand that other person, where he comes from, his thinking and adapt yourself to establish within the confines of those findings a true professional and personal relationship. It will be so much more rewarding!
