The International Monetary Fund (IMF) proposes that the Icelandic government raise the value added tax (VAT) on groceries to 25.5 percent to increase the revenue for the state treasury. The IMF also proposes to increase the VAT on products that currently have a seven-percent VAT and thereby discontinue the lowest VAT level.
From a grocery store in Iceland. Photo by Eygló Svala Arnarsdóttir.
Minister of Economic Affairs Gylfi Magnússon told visir.is that no decision has been made in the cabinet whether to follow the IMF’s proposal on tax increases.
“These are only their suggestions and ideas and I don’t want to say whether it is likely or unlikely that something similar to this will be carried through,” Magnússon said and referred journalists to Minister of Finance Steingrímur J. Sigfússon.
“I am absolutely against it,” said Jóhannes Gunnarsson, chairman of the Consumer Agency. “It is too severe an attack on the standard of life; they can’t handle this. I certainly hope these suggestions won’t be followed.”
The suggestions were made after the Icelandic government asked the IMF’s specialists to review the taxation system and propose how the state’s revenue can be increased by one to two percent of gross domestic product in the coming years.
The IMF concluded that the taxation system is basically good, although some amendments are proposed. Other proposals include raising the capital tax to 20 percent and to decrease the number of taxation levels.