Iceland’s Parliament Proposes Tax to Fund Lava Barriers Skip to content

Iceland’s Parliament Proposes Tax to Fund Lava Barriers

By Yelena

Grindavík earthquakes crevasse
Photo: Golli. Grindavík, Southwest Iceland. A crevasse formed by powerful earthquakes.

Iceland’s Parliament held its first reading of a bill that proposes an additional 0.08% property tax to fund the building of lava barriers that would protect key infrastructure on the Reykjanes peninsula from a potential eruption. The town of Grindavík, located on the south side of the peninsula, was evacuated last Friday due to strong earthquakes and a magma dyke forming beneath the town. The town and surrounding area have sustained damage to roads, homes, and power and water infrastructure.

Additional property tax to fund barriers

The parliamentary bill proposes levying an additional tax on homeowners in Iceland equivalent to 0.08% of their property’s fire insurance valuation (brunabótamat) in order to fund the building of lava barriers. The owner of a property worth ISK 100 million [$695,000, €650,000] would therefore pay an additional ISK 8,000 [$56, €52] in taxes per year if the bill is passed in its current form.

“Temporary” tax hike

The tax would be imposed for a period of three years and is projected to funnel nearly ISK 1 billion [$6.95 million, €6.5 million] into state coffers. MPs expressed a strong desire to help the residents of Grindavík and protect infrastructure on the peninsula, which includes the Svartsengi Power Plant. However, Pirate Party MP Þórhildur Sunna Ævarsdóttir and Centre Party Chairman Sigmundur Davíð Gunnlaugsson argued that any lava barriers constructed should be paid for with existing tax revenue.

Iceland’s government has imposed such “temporary” taxes in response to natural disasters and to finance disaster prevention measures in the past, many of which later became permanent, as Vísir reports. After the Heimaey eruption in 1973, the government raised sales tax by 2% to help fund rebuilding in the Westman Islands. The hike was supposed to be temporary but was never rescinded.

The second reading of the bill will take place at 7:00 PM tonight. The bill is required to undergo three readings before it can be passed.

Residents allowed to retrieve belongings

All Grindavík residents were permitted to enter the town for a short period this afternoon in order to retrieve belongings and pets. The earthquakes on the peninsula have subsided since Friday and the situation remains largely unchanged since then. The damage caused by the quakes is visible across town, including crevasses across roads and cracks in buildings. While the magma intrusion still stretches across the town, threatening from below, experts are now saying a possible eruption could be smaller than previously feared.

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