The Icelandic government is gearing up to introduce its first steps towards lifting the capital controls that have been in place since the domestic banking system collapsed in 2008.
A central part of the strategy is to limit capital flight and prevent a plunge in the local currency, krona (ISK), probably by implementing a hefty exit task on foreign-exchange transactions, as have been discussed for several years now.
According to daily newspaper Morgunblaðið the exit tax could be 35% and directed at the three big bank estates, Glitnir, Kaupthing and Landsbankinn (LBI), all still in winding-up proceedings. Combined assets of the three estates are ISK 2,600 billion (USD 20.97 billion).
Morgunblaðið’s sources claim that the exit tax could bring at least ISK 500 billion (USD 4.3 billion) to the Icelandic treasury. For comparison, Iceland's 2013 GDP was ISK 1,873 billion (USD 15.11 billion).
This strategy is obviously principally aimed at foreign creditors of the bank estates, as only 6% of the creditors are Icelandic identities.
The exit tax would also be used to target the huge amount of offshore ISK that threaten the stability of Iceland’s small currency.
The Central Bank has reduced the stock of offshore ISK, both through special transactions and auctions, but far less than was expected or hoped for.
According to a report by Iceland’s Financial Ministry, provided for the parliament in March this year, offshore ISK amounted to ISK 327 billion (USD2.64 billion) at the end of 2013, compared to ISK 565 billion (USD 4.56 billion) following the collapse of the financial system in 2008.
Another important step in the liberalization strategy is to reopen ways for Icelandic investors, institutional and private, to invest outside Iceland. According to Morgunblaðið that will be part of the plans that will be introduced before the end of this year.
The Icelandic government is gearing up to introduce its first steps towards lifting the capital controls that have been in place since the domestic banking system collapsed in 2008.
A central part of the strategy is to limit capital flight and prevent a plunge in the local currency, krona (ISK), probably by implementing a hefty exit task on foreign-exchange transactions, as have been discussed for several years now.
According to daily newspaper Morgunblaðið the exit tax could be 35% and directed at the three big bank estates, Glitnir, Kaupthing and Landsbankinn (LBI), all still in winding-up proceedings. Combined assets of the three estates are ISK 2,600 billion (USD 20.97 billion).
Morgunblaðið’s sources claim that the exit tax could bring at least ISK 500 billion (USD 4.3 billion) to the Icelandic treasury. For comparison, Iceland's 2013 GDP was ISK 1,873 billion (USD 15.11 billion).
This strategy is obviously principally aimed at foreign creditors of the bank estates, as only 6% of the creditors are Icelandic identities.
The exit tax would also be used to target the huge amount of offshore ISK that threaten the stability of Iceland’s small currency.
The Central Bank has reduced the stock of offshore ISK, both through special transactions and auctions, but far less than was expected or hoped for.
According to a report by Iceland’s Financial Ministry, provided for the parliament in March this year, offshore ISK amounted to ISK 327 billion (USD2.64 billion) at the end of 2013, compared to ISK 565 billion (USD 4.56 billion) following the collapse of the financial system in 2008.
Another important step in the liberalization strategy is to reopen ways for Icelandic investors, institutional and private, to invest outside Iceland. According to Morgunblaðið that will be part of the plans that will be introduced before the end of this year.
