Finance Minister of Iceland Presents 2010 Budget Skip to content

Finance Minister of Iceland Presents 2010 Budget

By Iceland Review

Minister of Finance Steingrímur J. Sigfússon presented the government’s budget bill for 2010 at a press conference yesterday, commenting that it was the most difficult budget an Icelandic finance minister has ever submitted.

Minister of Finance Steingrímur J. Sigfússon. Photo by Páll Kjartansson.

The total deficit of the state treasury is estimated to be ISK 87.4 billion (USD 694 million, EUR 437 million) next year. This year it will by ISK 182 billion (USD 1.5 billion, EUR 910 million), Morgunbladid reports.

The total expenses of the state in 2010 will be ISK 546 billion (USD 4.3 billion, EUR 2.7 billion), compared to ISK 589 billion (USD 4.7 billion, EUR 3 billion) this year.

The state’s revenue next year is estimated to be ISK 468 billion (USD 3.7 billion, EUR 2.3 billion), ISK 61 billion (USD 484 million, EUR 305 million) higher than assumed in a reviewed budget for 2009.

An ISK 95 billion (USD 755 million, EUR 475 million) cutback between years is imminent, the minister said, according to ruv.is.

Therefore it is necessary to reduce the state’s expenses and increase its revenue. Direct taxes are supposed to deliver ISK 37.6 billion (USD 299 million, EUR 188 million) in additional revenue.

Increased tariffs in the fields of energy, environment and natural resources are supposed to deliver ISK 16 billion (USD 127 million, EUR 80 million) to the state treasury next year, a move which has been harshly criticized by executives of aluminum companies and Helgi Magnússon, chairman of the Federation of Icelandic Industries, Fréttabladid reports.

Magnússon said the government was “shooting itself in the foot” by taxing the export industries, adding that households will also suffer from higher energy tariffs.

“The tariffs are directed at the companies in this country who are trying to restore the economy and create jobs,” claimed CEO of Alcoa Iceland Tómas Már Sigurdsson, adding, “I doubt that this taxation will attract new investment.”

Minister of Industry Katrín Júlíusdóttir said the intention with taxation is never to bankrupt an industry. “I would never support immoderate tariffs but during the current circumstances I believe we can handle a layer of new taxes.”

According to ruv.is, Finance Minister Sigfússon said that the deficit must be repaired quickly and that the government had therefore decided to take a big step in cutbacks and increasing the state’s revenue in 2010, assuming that the worst will be over after next year.

With these measures, the debt situation will remain stable, the minister argued, pointing out that in 12-18 months Iceland’s debts grew from ten percent of the gross domestic product to 60 percent.

Other savings measures include that the number of ministries will drop from 12 to nine during this term. An Economic and Business Ministry was created yesterday, Sigfússon said, which will work on projects which used to be the responsibility of three ministries.

Sigfússon also mentioned during yesterday’s press conference that he is not planning to sign a binding agreement with the UK and the Netherlands on Icesave without consulting Althingi, the Icelandic parliament, first.

The minister expects to review the situation with the opposition parties tomorrow—Bjarni Benediktsson, chairman of the Independence Party, has requested a meeting with the government leaders to discuss Icesave—and the reactions of the British and Dutch governments have already been presented to the parliament’s committees.

Click here to read more about Icesave.

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