European Union moves forward with plan to tax sanctioned Russian assets

2023-09-07 11:37:01

European Union officials will begin meeting with member states this week to outline the EU’s plan on how to impose a tax on profits generated by more than 200 billion euros of frozen Russian central bank assets to help rebuild Ukraine. .

The European Commission, the EU’s executive arm, will propose how to legally transfer revenues generated by the assets to the EU budget, according to a draft document on the process seen by Bloomberg.

The commission will meet with officials from Spain, Belgium, Italy, France and Germany on Thursday, and then with all member states next week, according to a person familiar with the plans who spoke on condition of anonymity. Commission President Ursula von der Leyen previously said she would present a legislative proposal before the summer holidays, but that deadline has since shortened.

A commission working group supports implementing the document’s three main proposals step by step, rather than all at once, according to the document.

The measures include clarifying the scope of duties for the financial obligations involved, imposing requirements for central securities depositories to separate cash balances from Russian assets and transferring the revenues to the EU budget as external assigned revenue, in accordance with the document.

The Russian central bank’s assets tied up in the EU are expected to generate around €3 billion in extraordinary profits. More than half of the assets are in cash and deposits, while a “substantial amount” of the remainder is in bonds that will be turned into cash as they mature over the next two to three years, Bloomberg previously reported.

Many of the funds are in Belgium at settlement giant Euroclear Ltd., where they generated nearly 750 million euros in the first quarter of this year.

The prospect of taxing and confiscating windfall profits raises legal and financial questions. The European Central Bank has issued reservations regarding the European Commission’s plan. Several countries have raised concerns that the use of asset returns could encourage holders of official reserves to turn their backs on the euro.