Minister of Finance Bjarni Benediktsson presented the government’s 2015 budget bill when parliament reconvened after the summer break on Tuesday.
The lower VAT rate will increase from 7 to 12 percent while the higher VAT rate will decrease from 25.5 to 24 percent at the end of the year. At the same time, general excise tax will be suspended and child benefits will increase by 13 percent to offset the rise in food prices due to an increase in VAT.
The suspension of general excise tax means that the price of sugary foods, beverages, building supplies, spare parts for cars, larger home appliances and other electronic devices will drop.
This year’s budget is expected to have a surplus of ISK 4.1 billion (USD 34.5 million, EUR 26.6 million), ruv.is reports.
The State Treasury’s total expected revenue is ISK 644.5 billion while expected expenditure is ISK 640.5 billion. Both the expected revenue and expenditure is ISK 30 billion higher than forecast in the last budget.
The VAT exemption on companies selling tourism services will expire on May 1 next year. This means that whale watching, horseback riding, snowmobiling and other such trips will incur a 12 percent VAT rate.
Treasury debt is expected to be 76 percent of GDP at the end of this year, down from 90 percent in 2011.
The minister said that the only realistic way to reduce government debt in the short term was to sell its assets, referring to the state’s 30 percent stake in Landsbanki.