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Still little price reduction at restaurants

According to the Public Federation of Iceland (ASÍ), the VAT reduction and abolition of excise taxes on groceries from March 1 have delivered good results in price reduction at supermarkets, but not in restaurants.

“They are not delivering results,” Henný Hinz, project leader at ASÍ told Morgunbladid. She explained the seven percent VAT reduction should have resulted in an almost nine percent drop in restaurant prices, but they have only dropped by 3.2 percent.

“We wanted to see more reduction in the last measurements of the consumer price index. […] The change in VAT should have been visible in consumer prices,” Hinz said.

“Most had hoped people would react this month, but nothing is happening and that is very regrettable,” Hinz concluded. At this time last month reports revealed that restaurants had not lowered their prices as much as they should have.

There is no legal way to enforce price reductions despite the VAT cut and abolition of excise taxes.

According to ASÍ’s research, not all supermarket chains have reduced their prices equally; 10-11 reduced their prices the least, by 4.4 percent, while 11-11 reduced their prices the most, by 8.5 percent.

But Hinz said it may take a few months for the VAT reduction and abolition of excise taxes to deliver full results and she said she is happy with how much prices have been lowered already.

ASÍ investigated by how much the supermarket chains Hagkaup, Nóatún, Kjarval, 10-11 and 11-11 had reduced their prices between March 1 and February 1.

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