The regional council of Skagarfjörður municipality, North Iceland, voiced its strong opposition to the planned increase in VAT on accommodation from 7.0 to 25.5 percent as of May 2013 yesterday.
Tourists near Snæfellsjökull, West Iceland. Photo Copyright Icelandic Photo Agency.
A resolution stating that the increase would lead to a decline in tourist numbers and the number of staff employed by the industry was unanimously agreed on in council yesterday.
The council argues that the state will eventually lose out by increasing taxes and that the growth in tourism is not evenly spread out across the different regions of the country, ruv.is reports.
MP for the Independence Party Illugi Gunnarsson has also spoken out against the tax hike. Illugi says that Reykjavík will be the worst affected due to low availability of accommodation in the city, visir.is reports.
According to the Institute of Economic Studies at the University of Iceland, tourist numbers could drop by 48,000 annually if the hotel tax increase is implemented. While currently among the lowest, the change would make the VAT on accommodation in Iceland the highest in Europe.
The government argues that the increase is necessary in order to ensure that the industry grows under realistic conditions and not with an advantage over other industries. The tourism industry is currently exempt from the full VAT rate.
As Iceland Review Online reported earlier this week, the tax hikes have been covered in the international media in recent days and weeks. Iceland Review Online has received a number of letters in opposition to the increase in taxes.
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