The BBC has reported that:
Share trading in six of Iceland's biggest financial firms has been halted temporarily, the country's stock exchange has said. The includes the country's three biggest three banks, Kaupthing, Landsbanki and Glitnir. Iceland's government said it was drafting a plan to deal with the country's financial crisis. Banks now dwarf the rest of the economy, leaving Iceland heavily exposed to the global credit squeeze.
The country's largest banks have now agreed to sell off some of their foreign assets and bring them home, to help bolster the banking sector. This money will be brought back into Iceland, in an effort to shore up the economy and prevent the currency, the krona, from sliding any further. Last week, it lost a fifth of its value against the dollar. The government is now trying to persuade the trade union pension funds to repatriate some of their funds too. But in return, the unions want Iceland to apply for EU membership - a move it has resisted for decades.
Analysts have warned the troubled banking sector may be too big for Iceland to be able to save.
The sting is in the tail. The Icelandic economy is going to fail, as is its currency.
This will be the first country brought to its knees by the credit crisis. It won't be the last. We need to work out two things: the first is how to bail out tax havens, and on what terms. The second is how to bail out other countries.
Iceland is firmly in the first category. But this crisis is far too big to think it will stay in places as small as it is. The action has to begin now.
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Actually can you explain why Iceland is a tax haven?
Precisely for the reasons described here, all of which are actually negative attributes designed to create a low tax, lax regulation atmosphere to induce capital to artificially relocate to its shores, which is did, with catastrophic consequences
Richard
Richard,
Would low taxation plus a decent regulation atmosphere still mark a country as a “tax haven” in TR-UK’s book?
I have to argue with the presumption that it was lax regulation which induced capital artificially to relocate to its shores. In a normal capitalist society with no exchange controls (a must) capital flies to the place which offer the best risk/reward ratio. Unfortunately the highly leveraged financial system of the US and the attitude of solving problems with pouring cheap money onto every problem (by decreasing the interest rate to 1%) created the liqudity which flew to Iceland (among many other countries as e.g. New Zealand). This was called as a carry trade and had nothing to do with taxation at all. Consequently the question of capital flow matter had no relation to any changes to the tax system, at least in the case of Iceland.
Please read what I say on this blog more carefully: tax haven is a term we are leaving behind. Secrecy jurisdiction is one we prefer.
A secrecy jurisdiction allows action that deliberately allows its financial structures to be exploited to undermine the stability of another state.
That’s a pretty good description of Iceland today
Richard
Dear Richard,
I try to read the blog carefully, but still find the title of this entry “THE FIRST TAX HAVEN NEEDS BAILING OUT. WHO’S GOING TO SAVE ICELAND?”
and not Secrecy Jurisdictions…
On a separate note, can you point to the exact and specific secrecy provision in Icelandic legislation which enables someone to call Iceland as a secrecy jurisdiction? Thanks
Laszlo
Candidly, right now, no
Iceland has collapsed
No one disputes this is because of the failure of its regulation and its abuse of international finance
Candidly: rather a lot might be down to fraud (even if not criminal). The reputation of some who have used it as their base has not been great
And you want to discuss the minutiae
Don’t you think you might be re-arranging the deck chairs?
Richard
Richard
I was just curious to know why Iceland was called as a tax haven or a secrecy jurisdiction, that is why I was asking for specific details on the topic. This of course has nothing to do with shady characters operating out of Iceland or them committing non-criminal fraud, although you could find such shady characters operating from any country 8such as Marbella in Spain).
Concerning the minutiae I am indeed curious to find facts. Interpretation of such facts can of course be different but it is good that we no longer live in socialism/communism and we can debate freely.
Rgds
Laszlo