Social Democrats propose to raise financial income tax, cut food tax Skip to content

Social Democrats propose to raise financial income tax, cut food tax

At an open forum on Saturday, Ingibjörg Sólrún Gissuradóttir, leader of the Social Democrats, introduced her party’s economic policy including ideas on increasing financial income tax (capital gains, dividend and interest income) reports the Icelandic National Broadcasting Service. Ingibjörg believes that stopping planned tax cuts, using the current budget surplus to decrease food tax, and increasing the standard individual deduction would promote equality in Iceland.

At the forum, Ingibjörg said that Iceland should join the European Union and take up the Euro; she said that keeping the the Icelandic Króna was equal to having a “trade barrier”.

Ingibjörg said that she would like to stop the planned ISK 6 billion income tax cuts and instead use one third of the money (ISK 2 billion) to raise the zero tax point, and use two thirds (ISK 4 billion) of the surplus to decrease food tax from the current 14% tax to 7% tax. Ingibjörg said that she would like to increase the surplus from ISK 14 to ISK 20 billion. She wants to do this by rearranging the budget and increasing financial income tax.

In an article written last December, Jóhanna Sigurdardóttir, MP for the Social Democratic Alliance Party, pointed out that for the 2003 tax year 1% of the wealthiest Icelanders paid the lowest taxes. These 500 declared 88% of their wages as financial income and were taxed accordingly.

Tax on financial income is 10% while State income tax is 25-27%. Moreover, financial income is not taxed at the municipal level whereas ordinary salaries are assessed an additional tax of an average 12%. This means that the effective tax rate of people earning primarily financial income is considerably lower than that of those earning regular salaries.

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