Iceland to introduce bill to lift capital controls this week

REYKJAVIK (Reuters) – Iceland’s government plans to introduce a bill to parliament this week outlining measures to start the process of lifting capital controls, Prime Minister Sigmundur Gunnlaugsson said.

Gunnlaugsson said the measures would be accompanied by the imposition of a “stabilization tax” but he did not make clear whether such a levy would be part of the bill. Politicians have talked of imposing a tax on money that foreign creditors want to take out of the country.

The measures have been long-awaited after authorities have signaled for a year their intention to lift controls and return to the financial mainstream.

The island nation of 330,000 is emerging from years of hardship following its 2008 financial meltdown and has been trying to untangle remaining issues such as the foreign creditors of its three banks that collapsed.

Politicians have talked about a so-called stabilization, or exit, tax on recovered debt that the creditors of the banks may want to take out of the country. Gunnlaugsson, speaking late on Sunday, did not say whether the tax would cover these or other foreigners or both.

The level of the tax has not been announced but rates of 25 to 40 percent have been touted, according to local media. Asked by Bylgjan radio station whether an exit tax was still on the table, Gunnlaugsson said, “Yes, and it will be introduced, when these measures have begun to be implemented”. 

“As I have been saying for the last four, five, even six years, it is clear that in order to loosen the capital controls, a considerable amount of capital will have to remain in the country.”

Ministers and the central bank have said a tax is necessary to avoid a huge exodus of capital, causing massive disruption to the Icelandic crown <EURISK=> <ISK=> and trade balance.

The authorities will also have to deal with foreign capital invested in Icelandic assets that has been frozen in the country due to the controls, as well as the ability for Icelandic entities such as pension funds to invest abroad.

(Reporting by Holmfridur Helga Sigurdardottir; writing by Sabina Zawadzki; Editing by Susan Fenton)

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