The price of tobacco and strong alcohol increased on January 1 for the sixth year in a row.
The levy of tobacco increased by 12.5 percent in 2008, 15 percent in 2009, 10 percent in 2010, 7 percent in 2011 and 5 percent in 2012.
The plan is to raise the levy by 20 percent early this month, increasing the price of a packet of cigarettes by ISK 108 (USD 0.83, EUR 0.63) to around ISK 1,200 (USD 9.26, EUR 7).
Rúv.is reports that the cost of smoking one packet a day has increased to around ISK 450,000 (USD 3,473, EUR 2,660) per year.
According to Sölvi Óskarsson, owner of tobacco store Björk, few people stocked up on tobacco before the price increase instead having the goal of quitting smoking in the New Year.
The levy on strong alcohol also increased, by 4.6 percent.