Iceland’s finance minister has announced a 39 per cent tax on investors looking to take their money overseas.
The country has imposed the tax to prevent it hemorrhaging money as it loosens bank laws imposed six years ago, when Iceland made the shocking decision to let its banks go bust.
Iceland also allowed bankers to be prosecuted as criminals – in contrast to the US and Europe, where banks were fined, but chief executives escaped punishment.
The chief executive, chairman, Luxembourg ceo and second largest shareholder of Kaupthing, an Icelandic bank that collapsed, were sentenced in February to between four and five years in prison for market manipulation.
“Why should we have a part of our society that is not being policed or without responsibility?” said special prosecutor Olafur Hauksson at the time. “It is dangerous that someone is too big to investigate – it gives a sense there is a safe haven.”
While the UK government nationalised Lloyds and RBS with tax-payers’ money and the US government bought stakes in its key banks, Iceland adopted a different approach. It said it would shore up domestic bank accounts. Everyone else was left to fight over the remaining cash.
It also imposed capital controls restricting what ordinary people could do with their money– a measure some saw as a violation of free market economics.
The plan worked. Iceland took a huge financial hit, just like every other country caught in the crisis.