Cyprus govt to seize 6.75% of all bank accounts as of Sat morning

[soupcxan]

The government declares one Saturday morning (while the banks are closed, of course) that all bank accounts in the country will immediately be taxed on their balances 6.75% up to $100,000 and 9.9% above $100k. The banks are prohibited from letting account holders withdraw more than 93.25%/90.1% of their balances.

To me this sounds like hypothetical fear mongering on AM talk radio, but in fact is happening today in Cyprus (account limits are EUR not USD). Am I the only one scared by the precedent this sets?

http://www.nytimes.com/2013/03/17/b...ypriots-try-to-get-cash-out-of-banks.html?hpw

 

[bondi688]

And there are other governments looking on to see if the Cypriot government can pull that one off. And the ER crowds may have to go back to their spread sheet to recalibrate if taxing assets on top of incomes becomes official policies.

 

[MichaelB]

I've lived through worse than that. Twice, in fact (Venezuela). Nothing to do with the US, not even sure it has any impact on us.

 

[jon-nyc]

I might be scared if I had money in (say) a Greek bank, but then you'd have to be an idiot to have money in a Greek bank.

 

[bondi688]

I've lived through worse than that. Twice, in fact (Venezuela). Nothing to do with the US, not even sure it has any impact on us.

No, the US government will not act like the Cypriots, but taxing assets and wealth may not be totally out of the question in the future.

 

[HawkeyeNFO]

Apparently about half the $$$ in these banks is sent from Russians, a substantial amount of that is from shady/illegal activities. My fear is that if this Eurozone country's move here doesn't cause political unrest and perhaps even violence, we could see this again in a larger EU nation. This may just be a small test run.

Cyprus can't print more money on its own like the US can. So they need a different source of funds for their bailouts.

 

[HighRoller]

I don't think the US Gov would ever consider such a thing. When they need more money, they'll just print it and raise your income taxes.

 

[imoldernu]

Cyprus - Wealth Tax

Cyprus Bank Deposits to Be Taxed in $13 Billion Bailout - Bloomberg

May be news to keep an eye on:

 

[Koolau]

Yup, the gummint here can simply tax us with future inflation. Then it's not just the fat-cats, criminal element, or others "hiding" their assets in plain site who will be "taxed". It will be ALL of us. Anyone remember the mid 70s to mid 80s? A 6.75% "confiscation" was like about 9 months of just going about the j*b of Living in the USA. YMMV

 

[MichaelB]

The US did face a crisis of banking insolvency 5 years ago, and we dealt with it differently. In our case it didn't involve taxes or losses for the depositors, just added liquidity in the financial markets, and as the Fed has supplied the financial sector with that, the economy has recovered. Perhaps overly simplistic, but we have already dealt successfully with a much more serious financial crisis.

 

[clifp]

I've lived through worse than that. Twice, in fact (Venezuela). Nothing to do with the US, not even sure it has any impact on us.

Really wow. When you have time I'd be interested in hearing more.

 

[imoldernu]

Getting into flat tax vs. progressive. Should be interesting to see how the retirees will view this. Especially ultra conservative average retirees.

Some in depth discussion of the subject from Sept 2011:

http://www.bcg.com/documents/file87307.pdf

 

[MichaelB]

Really wow. When you have time I'd be interested in hearing more.

Happy to talk about it, perhaps a different thread is called for. I'll work on it if you're interested.

 

[marko]

The US did face a crisis of banking insolvency 5 years ago, and we dealt with it differently. In our case it didn't involve taxes or losses for the depositors, just added liquidity in the financial markets, .

won't "adding liquidity" increase inflation dramatically in the future....which is a back-door tax on everyone, isn't it?

 

[Sparkie67]

Meanwhile here in Oz, as of 31 May this year, any bank account that has not had a deposit or withdrawal into or from it in the previous 3 years will be taxed at 100% by the government. All banks will be required by law to deliver the money to the tax office.

Apparently you can apply to have it returned, but really.

 

[Texas Proud]

Meanwhile here in Oz, as of 31 May this year, any bank account that has not had a deposit or withdrawal into or from it in the previous 3 years will be taxed at 100% by the government. All banks will be required by law to deliver the money to the tax office.

Are you sure that this is a 'tax' That the person will never get the money back?


IOW, here after 5 years an account is deemed 'dormant' and the money is sent to the state. However, they hold it for you should you ever come forward.... so, not really a tax, but they get to use the money...

 

[sengsational]

Nothing to do with the US, not even sure it has any impact on us.

I'm not so sure that any significant financial event anywhere in the world would not have any impact at all on the US. It will be one of these kinds of events that causes a cascading debt crisis that will effect the world economy. It might not be a devastating effect, necessarily, but as interconnected as the financial systems are now, I find it hard to believe that any event like this can be summarily dismissed.

--Dale--

 

[imoldernu]

RE unclaimed money.
You may want to go to this site, which has links to states that handle unclaimed monies. Free. Just enter your name.
3 years ago, I went to my birth state's site, and instantly found three very old, (1938 to 1945) small insurance policies that my parents had started for me. It was true, and these old "Gerber" policies had grown to $4756. I was able to apply to the company, over the phone, and upon answering a number of personal questions to validate identity, I received a check in that amount in four days.
Good Luck!

NAUPA

 

[MichaelB]

I believe sparkie67 is referring to a new regulation in Australia.

 

[Alan]

Are you sure that this is a 'tax' That the person will never get the money back?


IOW, here after 5 years an account is deemed 'dormant' and the money is sent to the state. However, they hold it for you should you ever come forward.... so, not really a tax, but they get to use the money...

It is the same in Oz. The article sparky linked to says that the definition of a dormant bank account has been shortened from 7 years to 3 years, and you can claim it back from the government just like before.

The money can be reclaimed from ASIC but the process can take months.
.
.
.
The previous legislation allowed for bank accounts to remain inactive for up to 7 years before the money was transferred to ASIC.

​

 

[ratto]

Based on the report I read, about 1/3 bank deposit in Cyprus belongs to foreign holders. There is also accusation that Cyprus banking system has allowed tax invasion and black money for too long. So asking whoever has over 100k euros in deposit for one-time 9.99% tax is not too far-stretched from some other EU members. It would be unfair to ask Germans to foot bills every time. There have already been bank runs in Cyprus now, even including a man threatened to get his deposit out of his bank by using a bulldozer. Not sure if online banking will make any difference in this case. I guess it probably would be even easier for government to put restriction on asset transfer initiated online if deemed necessary. We can potentially inflate our debt obligation away, but the price must be paid, sooner or later, by someone.

 

[jebmke]

I've lived through worse than that. Twice, in fact (Venezuela). Nothing to do with the US, not even sure it has any impact on us.

On the business side I was pretty heavily into the situation in Argentina when they un-pegged. In some ways this was the equivalent of seizing about 75% of the bank deposits in local currencies. Those were interesting times. The locals who didn't have USD accounts offshore were not happy campers.

Our dealings in Venezuela were almost exclusively with PDVSA so we dealt strictly in USD and all transactions occurred through a bank outside of VEN.

 

[bondi688]

While the article said a lot of accounts in Cypress were set up by money from Russia, by history, proximity and linkage, there must be a lot of money from Greece as well.

 

[Koolau]

Truly, the law of unintended consequences will kick in in Cyprus. It will be a cold day in Paradise before most folks put any more money into their accounts there. Fool me once., etc.... YMMV

 

[jon-nyc]

Excellent piece on the subject by Felix Salmon

The Cyprus precedent | Felix Salmon