Iceland Exit Tax Could Be 40%

Dec 9 2014 | 6:53am ET

Iceland’s planned exit tax could be as bad—or worse—than the hedge funds with hundreds of millions of dollars stuck on the island fear.

The country, which imposed capital controls keeping about US$6.6 billion from being removed abroad during the financial crisis, are mulling a tax of between 25% and 40%, Bloomberg News reports. A levy on the higher end of that range would likely lead to lawsuits from the creditors of Iceland’s failed banks, among them Davidson Kempner Capital Management and Taconic Capital Advisors. Representatives of the banks’ winding-up committees have blasted the idea of a 35% tax as “an expropriation of assets” and “confiscation.”

“They will use every part of every legal system available to them to ensure that they are treated appropriately and fairly,” the Blackstone Group’s Timothy Coleman, an adviser to Kaupthing Bank’s creditors, told Bloomberg.

The tax figures were discussed as part of talks about ending the six-year-old capital controls, and come ahead of talks with the banks’ creditors, including the hedge funds, on a settlement.

It remains possible that Iceland would impose no exit tax, as well, according to Bloomberg.

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