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New Taxes on Fuel

The Ministry of finance assigned a committee to look into the taxation of cars and fuel. The committee suggested that cars should pay taxes of fuel in relation of how much CO2 they release.

Large cars which release more CO2 will pay up to 60 percent tax on each liter, but smaller cars that release less CO2 will pay around five to ten percent. This new tax will not affect airplanes and ships. Morgunbladid reports.

The committee was summoned in 2007 to update the taxation of cars and fuel. The aim of the new taxation is to encourage people to use environmentally sound vehicles, to increase the conservation of fuel and decrease the release of CO2.

According to a report published by the committee, cars in Iceland pollute more than any other country within the EU. Although the average release of CO2 has declined, the total amount is increasing.

When the committee was summoned, the price for one liter of gas was 121.20 ISK and 121.30 ISK for diesel oil but current price is 162.40 ISK for gas and 177.80 for diesel.

Runólfur Ólafsson, CEO of the Icelandic association of car owners, says the new tax is pointless. The global price for gas has been rising too much and the comparison to the EU is misleading. Public transport system in Iceland is less developed than in other EU countries and the private car is the most common form of transport in Iceland

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