US urges allies to slash tax on profits from Russia's frozen assets

The US is urging Europe to slash taxes on earnings from frozen Russian assets as part of a proposal to fund Ukraine by borrowing against future profits that it says will free up $50 billion, Report informs referring to the Financial Times.

Daleep Singh, US deputy national security adviser for international economics, told the Financial Times that the G7 was discussing an idea from Washington to bring forward the value of interest income from the assets to get the cash to Kyiv as early as this summer.

Western allies immobilized 260 billion euros of Russian central bank assets following Moscow’s invasion of Ukraine in February 2022 but have since been split over what to do with the frozen trove. Washington favors confiscating the reserves in their entirety and handing them to Ukraine, but many European officials have warned such a move would breach international law, unsettle global markets and undermine the status of the euro.

Instead, the US proposed last week that tens of billions of euros could be raised for Ukraine by securing loans against future profits from the frozen assets. It is hoping to secure agreement from allies by the G7 leaders summit in Italy in June. Singh said the move could involve a bond issue to the private sector or a loan by one or several G7 governments that would be repaid in the first instance by the interest income.

He argued that the allies should aim to release about $50 billion of funding for Ukraine via the proposal. But to make the idea work, Singh told the FT it would be critical to “maximize the yearly interest income” from the assets. By discussing where the money is reinvested and by changing the tax treatment of the income flows, the value of the interest payments could get up to 5 billion euros a year, he said. “Where the assets are invested matters but also the degree to which it is taxed,” he said. “We should maximize every euro from these immobilized reserves for the benefit of Ukraine.”