Lifting capital controls – in a hurry
There were negotiations and changes until last minute. So much, that the various press releases published after the presentation of the plan to lift capital controls do not have the same numbers as to the percentage of a possible tax.
The tax percentages agreed on, as far as I understand, in negotiations with representatives of creditors is the one published in the press releases referring to Kaupthing, Glitnir and LBI:
The Task Force’s preliminary analysis suggested that to achieve the goal of neutralizing a threat to the balance of payments, this Stability Tax would be set at a rate of 37% of the total assets of each estate (measured as of end-June 2015), with an automatic exemption of ISK 45bn for each estate, which would bring the effective tax rate down to about 35%.
Tax of 37%, de facto 35% after exemption, on the assets as they are at the end of June this year – was then changed and the automatic exemption was removed. The changes were the tax as it was presented at the press conference and in a general press release following the presentation:
A new bill of legislation on a stability tax imposes a one-off 39% tax on the total assets of the failed commercial or savings banks in accordance with their assessed value as of 31 December 2015.
This indicates that the tax was in the end higher than had been negotiated with representatives of the creditors, who were not amused, or so I hear, when they saw the changes.
*I am writing this ca. 8 hours after the press releases have been published but this has not yet been corrected.
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My knowledge of this issue is becoming rusty. Does this still affect the British FSCS or have they been paid off out of the non-ISK assets of the Landsbanki estate? If I recall correctly, the Dutch deposit insurance scheme cut its losses and sold its interest, so they are no longer affected.
Tim Young
9 Jun 15 at 8:22 am
The FSCS scheme has not been paid in full yet, will be in 2018, if I remember correctly – but the funds going to them are outside of any measures, i.e. will not be reduced by stability contribution or tax. See here: http://www.ministryoffinance.is/news/nr/19599
Sigrún Davídsdóttir
9 Jun 15 at 9:21 am
I have seen it reported elsewhere as “The government is pressuring creditors to agree by threatening to apply a 39% exit tax to creditors not participating in the state-sanctioned agreements. If creditors ratify the restructuring they can expect to pay about half that amount to the government, a person involved in the talks said.” Which latter sounds far removed from any of the figures you quote. I guess only time will tell.
anrigaut
9 Jun 15 at 1:31 pm
Thanks for the information, Sigrun Davidsdottir. As a UK taxpayer and bank account holder (from whom FSCS will ultimately claw back any losses it sustains), I am glad to hear it! I think I would be annoyed if I were a creditor of one of the other two bank estates though. Taxing what partial and delayed recovery creditors can get from those bankruptcies seems like adding insult to injury.
Tim Young
9 Jun 15 at 2:54 pm
Sigrún, Any news on the Kaupthing trial?
Tony Shearer
13 Jun 15 at 2:59 pm
Nothing right now. All on track, more in autumn.
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