The Minister of Finance introduced a plan to lift the capital controls at a cabinet meeting Friday morning. According to the sources of DV, which broke the news, the plan is based on a 40% exit tax on foreign investors holding claims on the banks which collapsed in 2008, unless they reach an agreement which ensures the withdrawal of claims does not threaten the financial stability of Iceland. These investors have been locked in since 2008, when the controls were imposed to protect the króna (ISK), the currency of Iceland.
A settlement for the orderly withdrawal of foreign claims is a precondition for the lifting of the capital controls. All told, the foreign claims on the fallen banks amount to as much as 16.7 billion USD/14.9 billion EUR, while the entire foreign exchange reserves of the Icelandic Central Bank are just under 4.6 billion USD/4 billion EUR. A rapid retrieval of foreign claims would lead to a collapse of the currency, rapid inflation and a financial crisis. An exit tax is a classic solution to lifting capital controls under such conditions.
According to today’s reports the government will impose a 40% exit tax, billed a “financial stability tax” on foreign holders of Icelandic krona, which are overwhelmingly investors who own claims on the fallen banks, unless they reach an agreement with the government about a withdrawal of their claims which ensures the financial stability of Iceland. According to the sources of DV this agreement must be reached “in the next few weeks”, otherwise the tax will be imposed.
According to the sources of DV this plan will result in the government receiving “at least” 500 billion ISK (3.8 billion USD/3.4 billion EUR).
The details of the plan will be revealed to the public on Monday.
Read more: Kaupthing bank trial: might be one of the largest alleged market conspiracies seen in Europe
The Minister of Finance introduced a plan to lift the capital controls at a cabinet meeting Friday morning. According to the sources of DV, which broke the news, the plan is based on a 40% exit tax on foreign investors holding claims on the banks which collapsed in 2008, unless they reach an agreement which ensures the withdrawal of claims does not threaten the financial stability of Iceland. These investors have been locked in since 2008, when the controls were imposed to protect the króna (ISK), the currency of Iceland.
A settlement for the orderly withdrawal of foreign claims is a precondition for the lifting of the capital controls. All told, the foreign claims on the fallen banks amount to as much as 16.7 billion USD/14.9 billion EUR, while the entire foreign exchange reserves of the Icelandic Central Bank are just under 4.6 billion USD/4 billion EUR. A rapid retrieval of foreign claims would lead to a collapse of the currency, rapid inflation and a financial crisis. An exit tax is a classic solution to lifting capital controls under such conditions.
According to today’s reports the government will impose a 40% exit tax, billed a “financial stability tax” on foreign holders of Icelandic krona, which are overwhelmingly investors who own claims on the fallen banks, unless they reach an agreement with the government about a withdrawal of their claims which ensures the financial stability of Iceland. According to the sources of DV this agreement must be reached “in the next few weeks”, otherwise the tax will be imposed.
According to the sources of DV this plan will result in the government receiving “at least” 500 billion ISK (3.8 billion USD/3.4 billion EUR).
The details of the plan will be revealed to the public on Monday.
Read more: Kaupthing bank trial: might be one of the largest alleged market conspiracies seen in Europe
