The government submitted a bill on planned savings measures to state finances at Iceland’s Althingi parliament yesterday, estimating that ISK 13 billion (USD 102 million, EUR 73 million) in increased revenue can be achieved this year.
Inside Iceland’s Althingi parliament. Copyright: Icelandic Photo Agency.
As revealed yesterday, the measures include increasing the social security tax for employers, introducing a supertax on monthly salaries higher than ISK 700,000 (USD 5,500, EUR 3,900), Morgunbladid reports.
Additionally, capital gains tax will be increased from ten to 15 percent and paid quarterly, not annually—which will deliver ISK 10 billion (USD 78 million, EUR 56 million) this year alone—and the value-added tax of products high in sugar, such as candy and pastries, will be increased.
State expenses are also to be reduced by ISK 9 billion (USD 70 million, EUR 50 million). The savings measures can roughly be divided into three categories: cutbacks in state-run institutions, cutbacks in state-organized operations and cutbacks in expenses in the welfare system.
The most significant savings measure in the last category involves lowering the maximum paycheck senior citizens may receive per year without reducing their pension payments. This amount would be lowered from ISK 1.3 million (USD 10,000, EUR 7,300) to ISK 480,000 (USD 3,700, EUR 2,700).
Combined, the earnings of the state budget will improve by ISK 22.4 billion (USD 175 million, EUR 125 million) this year and this way the ISK 20 billion (USD 156 million, EUR 112 million) gap in the state budge will be closed.
The bill also includes an overview of savings and increased taxation until 2010. By that time the earnings of the state budget will have to be improved by ISK 56 billion (USD 437 million, EUR 313 million) with cutbacks and higher taxes.
In 2010, the state budget will generate ISK 63 billion (USD 492 million, EUR 352 million) in additional revenue, according to the government’s estimate—a large proportion of which will be earned through higher taxes.
Click here to read more about the supertax and other taxation measures.