Luxembourg’s ambassador to the United States has voiced objections to an Illinois House bill that would label Luxembourg a tax haven and subject corporations expatriated there to restrictions on investments and business dealings with the state of Illinois.
The Grand Duchy of Luxembourg’s ambassador to the United States has asked the Illinois House of Representatives to either amend or reject House Bill 3419, a bill that brands Luxembourg a tax haven.
In an official letter dated March 22 and addressed to Illinois House Speaker Mike Madigan and House Republican Leader Jim Durkin, Sylvie Lucas, ambassador of the Grand Duchy of Luxembourg to the United States, spelled out her objections to the bill. Lucas wrote that Luxembourg was not a tax haven or a destination for Illinois-headquartered corporate expatriations, and that HB 3419 would violate Illinois’ commitments to the World Trade Organization.
“Contrary to popular belief, Luxembourg is a high, not a low tax country. Corporate entities are subject in Luxembourg to various indirect taxes, alongside the corporate income tax,” Lucas wrote.
Although a founding member of both the European Union and NATO, some organizations have accused Luxembourg of being one of the biggest tax havens in the world, along with countries such as Ireland, Singapore and the Netherlands.
HB 3419 would forbid a business or a member of a unitary business group that is considered an “expatriate corporation” from submitting a bid or entering into a contract with the state. Any company that has incorporated in a “foreign tax haven” and meets certain other criteria is an expatriate corporation for purposes of state contracts. The bill sets a deadline of April 1, 2018, for the Illinois Investment Policy Board to create a list of expatriate corporations to include in the state’s rolls of “restricted companies.” When the list is finished it will be provided to Illinois’ state pension funds, which will in turn have 12 months to get rid of any direct holdings in any company that is on the list of restricted companies. HB 3419 also includes a list of countries, dependencies and territories it labels foreign tax havens: Andorra, Anguilla, Antigua and Barbuda, Aruba, the Bahamas, Bahrain, Barbados, Belize, Bermuda, British Virgin Islands, Cayman Islands, Cook Islands, Turks and Caicos Islands, Dominica, Gibraltar, Grenada, Guernsey-Sark-Alderney, Isle of Man, Jersey, Liberia, Liechtenstein, Luxembourg, Maldives, Marshall Islands, Monaco, Montserrat, Nauru, Netherlands Antilles, Niue, Panama, Samoa, Seychelles, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Tonga, U.S. Virgin Islands and Vanuatu.
Lucas makes several arguments in her letter, and cites American foreign policy on tax havens.
“[I]t is worth noting that the United States’ treaty policy is not to negotiate with tax havens, which only further demonstrates that Luxembourg is not a tax haven,” Lucas said in the letter.
Though the ambassador voiced her concern, HB 3419 has gained considerable support. Since the bill’s filing, nine representatives have signed on as co-sponsors: state Reps. Martin J. Moylan, Christian L. Mitchell, Katie Stuart, Silvana Tabares, Stephanie A. Kifowit, Lawrence Walsh Jr., John C. D’Amico, Sam Yingling and Sue Scherer. The bill has been placed on the calendar for a third reading and a short debate.
As if Illinois didn’t have enough problems, now House legislators have run headlong into foreign policy issues. Lawmakers should do their job and focus on the important problems facing Illinois. The Prairie State has one of the worst overall state and local tax burdens in America, and despite collecting massive amounts of tax revenue, the state has more than $12 billion in backlogged bills, $267 billion in unfunded government worker retirement liabilities and an $8 billion deficit. Cracking down on a landlocked, constitutional monarchy in Europe will not change any of that. Illinois lawmakers should focus on the problems at hand, instead of creating international incidents.