Minister of Finance Bjarni Benediktsson presented the 2014 budget bill when the Alþingi parliament convened yesterday for the first time after the summer break. He stated that the budget bill’s objective is to achieve balance in state finances and stop the accumulation of debt.
Bjarni Benediktsson. Photo: Páll Kjartansson/Iceland Review.
Bjarni stated that while this year’s budget was supposed to have an ISK 3.7 billion (USD 31 million, EUR 23 million) deficit, the deficit is now likely to amount to ISK 32 billion because the economic conditions have changed. Loss in revenue is, among other reasons, due to changes to the fishing tariff, he explained, ruv.is reports.
To counteract the foreseen ISK 27 billion deficit for 2014, the state’s expenses will be cut by ISK 12 billion, Bjarni reasoned. Each ministry will carry out cutbacks and new and upcoming projects will be canceled.
To increase the state’s revenue, the budget bill includes a higher tax on financial institutions, including institutions currently in winding-up proceedings.
The income tax and excise tax system will be reviewed with the middle level income tax decreasing by 0.8 percent to 25 percent, which will benefit households, Bjarni stated.
In addition, the increase of interest relief and child benefits, introduced by the last government, will be extended, as well as the refund of VAT for maintenance of houses as part of the Allir vinna project, aimed at boosting employment and eradicating black labor.