(Bloomberg) -- The European Union is moving ahead with a proposal to tax profits from more than €200 billion ($218 billion) of frozen Russian central bank assets to aid Ukraine’s reconstruction despite concerns from several member nations.
The European Commission tentatively plans to unveil its legislative proposed on Dec. 12 to impose a windfall tax on profits generated by the frozen assets. The draft plan would clarify that several issues raised by member states still need to be addressed and that the EU proposal won’t interfere with national taxes or other measures, according to a person familiar with the discussions.
The issue has divided the 27-nation union, with Belgium, Germany, France, Italy and Luxembourg among those expressing caution about speeding up the process and calling for a more gradual approach. Instead, they told other EU ambassadors last week that the EU’s executive arm should begin with a more informal document to continue narrowing down different options on how to use the profits, because they considered it premature to put forward a legal proposal, said people familiar with the matter.
The commission, however, said that EU leaders had told the bloc’s executive to accelerate its work on a proposal, the people added.
A meeting between national experts and the commission on Dec. 6 will be a key moment to determine whether the differences have been narrowed down enough, the people said.
The EU has been debating for months how swiftly to pursue the option to apply a windfall tax on the profits generated by the assets and tap the proceeds for Ukraine’s reconstruction. Estimates suggest that more than €200 billion of Russia’s sanctioned sovereign assets are in the EU, with the majority at the Belgium-based Euroclear clearinghouse. Smaller amounts are located in other EU nations.
Sanctioned Russian assets frozen at Euroclear have generated nearly €3 billion in profits from the time they were frozen through the third quarter of this year, according to data published last month. That figure is expected to continue to rise.
Belgium has said it will invest €1.7 billion next year to assist Ukraine by drawing on its own domestic tax revenue from the frozen Russian assets.
European Commission President Ursula von der Leyen had originally promised an EU-level proposal by this summer, despite skepticism from many capitals and the European Central Bank. During a visit to Kyiv in October, she set a new end-of-year target.
Adoption of the plan on Dec. 12 by the commission would allow EU leaders to consider it when they meet for a summit in Brussels later that week.
--With assistance from Alberto Nardelli.
©2023 Bloomberg L.P.
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