Should I bump the "Is taxation theft?" thread?
quote:We could always just call it a retroactive tax...
Ordering 10 percent of savings accounts to be seized, after that saved money was already taxed before as income, is theft.
THE LEVY THAT HAS SHOCKED CYPRUS' DEPOSIT-HOLDERS
HOW CAN THEY DO THAT?
Currently, all 17 European Union countries that use the euro offer deposit insurance to protect customers if their bank fails. But the measure in the Cyprus deal is a tax - not losses incurred because of a bank failure. In fact, it's meant to hold off a bank collapse. Countries have the right to raise or lower taxes whenever they want. Just ask the residents of Greece, Portugal and Ireland - all bailout recipients - who saw their tax bills skyrocket as those countries tried to reduce their debts. But Cyprus is charting new ground here, and there could be legal - and political - challenges.
AND HOW EXACTLY WILL THEY DO THAT?
Banks have already acted to seal off the amount of the levy - a 6.75 per cent tax on deposits under 100,000 euro and 9.9 per cent on those above - so depositors can't access it. Bank customers still can draw on the rest of their funds via ATM machines this weekend, and nervous depositors did that on Saturday to drain their accounts. But the few banks that opened on Saturdays did so only briefly, and no international transfers will be able to go through until Tuesday, since Monday is a holiday. Cyprus' Parliament is expected to meet Sunday to pass the required legislation. The deal also needs the approval of several eurozone parliaments; it's unclear how fast they can act and what will happen to bank deposits in the meantime.
HAS THIS EVER HAPPENED BEFORE?
So far in the euro crisis, depositors have been protected. But in the 1990s, Italy levied a tax on every bank account to stave off the collapse of its lire currency. The rate, however, was minuscule - 0.06 per cent - compared to what Cyprus is enacting. Iceland - another island with an outsized financial sector, although worse weather - also relied on depositors to prop up its banks. When the crisis hit there in 2008, Iceland protected its domestic deposits but reneged on deposit insurance for overseas, Internet-based accounts held by British and Dutch. Those two governments stepped in to help their citizens to the tune of $5billion. The U.K. and the Netherlands sued Iceland unsuccessfully in a European court to get their money back, but Iceland has nevertheless started to repay some of that money.
European officials are promising that Cyprus is a unique case, and they are right in one aspect: the country's banks are overwhelmingly funded by deposits, so it wouldn't have been very fruitful to go after bondholders.
WHAT WILL THE REACTION BE MONDAY?
Cyprus may be on holiday Monday, but the rest of the world will go back to work. Kirkegaard says that the decision to tap depositors indicates that the European Central Bank is confident that the risk of a bank run elsewhere in the eurozone is low - and by excluding Greek branches of Cypriot banks, they have reduced the possibility even further. Bond markets may react a little since bondholders were also tapped. Bank stocks will probably fall and they'll see their borrowing costs rise since this deal is a signal that other eurozone countries may call on bondholders, if their banks run into trouble.
But Heather Conley, director of Europe program for the Center for Strategic and International Studies, says it's hard to know the far-reaching implications of this one-off deal. The 'exceptions' created to solve Europe's debt crisis are adding up, she said. And some investors may look at this late-night, three-day-weekend deal and see what she saw: a dress rehearsal for a country dropping out of the euro.
If only there was a decentralized, digital currency that the government couldn't touch...
If our govt did this, what would be the response???
riots in the street as there should be