Iceland to Lower Planned Energy Tax by Half Skip to content

Iceland to Lower Planned Energy Tax by Half

The Icelandic government is planning to lower the amount which the controversial environment, energy and natural resources tax was supposed to deliver to the state treasury next year by more than half, from ISK 16 billion to 7.5 billion (from USD 128 million to 60 million, from EUR 86 million to 40 million).

The government offices. Photo by Páll Stefánsson.

Among those who have protested the planned tariffs are the Confederation of Icelandic Employers (SA) and the Confederation of Labor (ASÍ) and this proposal is an attempt to compromise, Fréttabladid reports.

The energy tariff will be ISK 0.12 per each kilowatt hour but not ISK 1 as originally proposed in the budget bill, according to the newspaper’s sources.

The government is currently working on changes to the country’s taxation system; one suggestion is a three-level system.

It is assumed that taxes will amount to 23.8 percent of gross domestic product (GDP) in 2010. This year the percentage will be 28, while in 2007 it was 31.4 percent.

In response to the SA and ASÍ’s demand, the government is also working on proposals to further increase the payroll tax.

Taking into account the increase in expenses from the state itself as a wage payer, the increase is expected to deliver ISK 7.5 billion to the state treasury. Last summer the payroll tax increased from 5.37 to seven percent.

The municipalities are also large wage payers and if they won’t be exempt from the proposed tax, their payroll expenses might increase by ISK 750 million (USD 6 million, EUR 4 million).

Hafnarfjördur, for example, would have to pay ISK 100 million in additional payroll expenses.

Click here to read more about the controversial energy tax and here to read more about the new taxation system.

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