Minister of Finance Steingrímur J. Sigfússon presented a parliamentary bill on increased tariffs on alcoholic beverages, tobacco, gasoline and oil yesterday. Once passed, the price of alcohol and tobacco will increase by 15 percent, the price of gas by ISK 10 (USD 0.08, EUR 0.06) per liter and of oil by five.
Minister of Finance Steingrímur J. Sigfússon speaking at parliament at an earlier occasion. Photo by Páll Kjartansson.
The government is also planning to raise the automobile tax by ten percent. These measures are expected to deliver ISK 4.4 billion (USD 35 million, EUR 25 million) to the state treasury every year. The increased taxes on alcohol and tobacco account for ISK 1.7 billion (USD 14 million, EUR 10 million) of this amount, Morgunbladid reports.
CEO of N1 oil company Hermann Gudmundsson said the taxes on fuel have increased considerably within a few months. “The government has now raised the fuel price by 16 krónas [per liter] in a few weeks and the state’s taxes are sky high.”
The CEO of Skeljungur (Shell Iceland), Einar Örn Ólafsson urged the government to increase efforts to stabilize the currency so that the price increase can be retracted.
The Icelandic Automobile Association released a statement saying that the government was waging “tax piracy” against the owners and users of automobiles. Representatives of the Confederation of Labor (ASÍ) and Confederation of Employers (SA) met last night and were reportedly also against the bill.
Thórdur B. Sigurdsson, the chairman of the Interest Association of Households, stated that an upper limit for the indexation should have been established before undertaking such measures so that they wouldn’t interfere with household debt. He speaks of “state inflation.”
MP of the Independence Party Tryggvi Thór Herbertsson said at parliament last night that while the bill results in an ISK 2.7 billion (USD 21 million, EUR 15 million) increase in revenue for the state this year, it adds ISK 8 billion (USD 64 million, EUR 46 million) to household debt.
Most economists who Morgunbladid got hold of last night agree with Herbertsson’s argumentation, although Thórólfur Matthíasson, a professor in economics at the University of Iceland, added that the increased revenue will go to the state treasury immediately but the increase on household debt will not fully materialize until after a few decades.