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Price cut of groceries in Iceland

By Iceland Review

The government has decided to cancel excise taxes of groceries and reduce tariffs and the value-added tax (VAT) to lower food prices in Iceland.

According to Fréttabladid, Prime Minister Geir H. Haarde said these operations would make Icelandic food prices comparable to that of the other Nordic countries.

The changes, which take effect on 1 March next year, include the cancellation of excise taxes of Icelandic and imported food products, reduction of the VAT from 14 to 7 per cent and the overall tariffs of common meat products will be reduced by up to 40 per cent.

In practice, that means that the average family will now spend ISK 120,000 (EUR 1,387, USD 1,739) less on groceries each year, based on information from Statistics Iceland.

Fréttabladid reports that Minister of Industry and Trade, Jón Sigurdsson, believes the nation as a whole will benefit from these operations and that the Icelandic agriculture will not have to suffer in the process.

But Haraldur Benediktsson, chairman of the federation of Icelandic farmers, disagrees. He told Morgunbladid that the price cuts will almost certainly cause wage reduction among farmers.

Additionally to food price cuts, the VAT will be reduced to 7 per cent on other products and services as well, such as books, magazines, accommodation and heating.

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