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The European Union (EU) is reportedly considering the imposition of a "windfall tax" on the profits derived from the frozen assets of the Russian central bank. Last Monday, EU foreign ministers approved the concept, and discussions on the matter are set to take place within the current week. Approximately 260 billion euros ($283 billion) of Russian Central Bank assets, frozen in the form of securities and cash by the EU, the G7, and Australia, could be subject to this tax. Euroclear, a clearinghouse, holds the majority of European assets, generating around €3 billion in interest last year.
The move is part of the broader effort by Western nations to hold Russia accountable for the damages resulting from the war in Ukraine. The proposal has received mixed reactions, with some EU countries, including Germany, expressing opposition on legal grounds. Finance Minister Van Peteghem of Belgium, holding the current EU presidency, highlighted the need for legal clarity and cautioned against potential impacts on the financial stability of systemic institutions like Euroclear.
Josep Borrell, the EU's foreign policy chief, indicated progress on the windfall tax during the foreign ministers' meeting, with discussions set to continue. The proposal involves a step-by-step process to identify relevant assets, determine the tax application, and decide how the proceeds will be transferred to the EU budget for use in Ukraine. The suggested stages aim to ensure legal soundness, deducting expenses and national taxes before transferring net income.
"I am convinced that we can move forward with this case," stated Minister Van Peteghem. However, he expressed cautiousness, emphasizing the need for a decision that is legally sound and does not compromise the financial stability of critical institutions. The windfall tax on frozen Russian assets is seen as a financial measure to contribute to the ongoing efforts to support Ukraine and address the broader consequences of the conflict.
By fLEXI tEAM