Richest 0.1 Percent Gets Richer

currency iceland

The wealthiest 242 families in Iceland saw their wealth grow by ISK 28 billion [$207 million, €186 million] last year. On average, each of these families gained ISK 116 million [$858,000, €772,000] in one year, Heimildin reports.

This group, the top 0.1 percent richest Icelandic families, has almost no debt, as their equity ratio stands at 98.4 percent. Each family owned on average ISK 1.5 billion [$11 million, €10 million] at the end of 2022 and owed only ISK 23 million [$170,000, €153,000].

Money attracting money

Although income inequality in Iceland ranks among the lowest in Europe, according to the Gini coefficient, wealth inequality remains a topic of debate. This recent data was reported by Minister of Finance Þórdís Kolbrún Reykfjörð Gylfadóttir in Alþingi as a response to an information request by Logi Einarsson, MP for the Social Democratic Alliance.

The data shows that the richest Icelanders earn most of their money by letting their money work for them. They invest in stocks and bonds, buy and sell businesses, and invest in property to be rented out or sold for profit. Therefore, nearly three quarters of the top 0.1 percent’s income was capital income. These earnings, which include dividends and profits from selling assets, are taxed at a lower rate of 22 percent, compared to the tax on wage income, which varies from 31.45 to 46.25 percent depending on the tax bracket.

In fact, 28 percent of all capital income in Iceland in 2022 went to these 242 families. If the group is widened to include the entire wealthiest top 1 percent, they received 46 percent of all capital income in Iceland last year.

Undervalued assets

Still, the assets of the top 0.1 percent are undervalued in these calculations. The data doesn’t include assets of Icelanders in pension funds and share prices are reported at their nominal value, instead of the market value which they could be sold at currently. The top 10 percent of wage earners last year owned 85 percent of all stocks held by households at the end of last year. These shares are worth a lot more than their nominal value indicates and, in all probability, the richer the family, the more shares it likely owns.

All in all, the wealth of all Icelandic households grew substantially last year, by ISK 1,624 billion [$12 billion, €11 billion] in total. The wealthier families received a disproportionally large share of this increase. Heimildin adds that for most Icelandic households, their wealth increase comes from rising property prices. Three quarters of Icelandic residential housing is held by people who own one property, generally the one they live in. For most people, this wealth could therefore only be realised by them selling their homes.

Annual List of Highest Tax Payers in Iceland Published

Finances in Iceland

The financial journal Frjáls Verslun has recently published their annual list of Iceland’s highest tax payers, compiled from public information available in the tax registry.

Number one on the list this year is Björn Erlingur Jónasson, former owner of Valafell ehf., a shipping company which he owned together with his wife, Kristína Vigfúsdóttir. The vast majority of the taxes paid, ISK 689 million of a total of 692 million, were from the sale of Valafell to KG Fiskverkun.

Another noteworthy member of Iceland’s “tax kings” is Haraldur Þorleifsson, former owner of tech company Ueno, which he sold to Twitter in 2021. Haraldur paid some ISK 592 million in tax for the sale, making him the highest tax payer in Reykjavík. However, this honorary status was taken on by choice, as Haraldur negotiated during the sale to pay tax in Iceland, and for the majority of the sale to paid in wages.

This choice placed the realized profit in a much higher tax bracket, as wages are taxed at 46% in Iceland, whereas capital gains income is taxed at a much lower rate of 22%. Haraldur has been an activist for increased accessibility for the disabled in public spaces, and he has stated in an interview with Stundin that he was happy to give back to the society which provided him with his education.

Despite being the highest tax-payer, however, Haraldur is far from the highest earner in Iceland. Stundin has criticized the list as giving an incomplete picture of wealth and inequality in Iceland. According to Stundin, in placing the emphasis on wage, the annual list hides income from capital gains, and thereby obscures the true centers of wealth in Iceland.

For example, the annual list places many of the CEO’s of Iceland’s shipping companies relatively low, as they take relatively modest monthly wages home. However, their total financial assets often represent figures in the hundreds of millions of ISK. As these sources of income are taxed at a much lower rate, the list could be said to present an incomplete view of income in Iceland.

Similarly, the tax report only includes individual income. Many of Iceland’s top earners, including artists, lawyers, and businessmen, make significant portions of their income through partnerships, cooperatives, and other organizations that are registered as separate tax entities.

The annual list also discloses a gender imbalance within the nation’s top earners. The first woman on the list, Kristín Guðríður Jóhannsdóttir, is to be found in 21st place. Within the top 50 earners in Iceland, only five women are represented.

Fishing Industry Profits Spark Wealth Distribution Debate

fishing in Iceland

Iceland’s largest seafood companies made huge profits last year, if the first published financial statements are any indication, Fréttablaðið reports. Opposition MPs are arguing that the industry should be taxed more so its earnings are more evenly distributed throughout Icelandic society. According to Minister of Fisheries Svandís Svavarsdóttir, the nation sees the industry as unjust, largely because consolidation of fishing quota has funnelled large profits into the hands of very few individuals.

Billions in profits

At the end of 2020, the seafood industry’s equity was evaluated at ISK 325 billion [$2.6 billion; €2.4 billion]. In the same year, the industry paid just under ISK 4.8 billion [$37.7 million; €35.2 million] in quota fees, while the state treasury faced record financial challenges due to the coronavirus pandemic.

The fishing industry has continued to grow despite the pandemic recession. Between 2020 and 2021, the total value of catch in Iceland increased around 9%, from ISK 148.3 billion [$1.2 billion; €1.1 billion] to ISK 162.2 billion [$1.3 billion; €1.2 billion], according to figures from Statistics Iceland. Prospects continue to be good, especially since the price of fish has risen dramatically in the wake of the Russian invasion of Ukraine.

Four companies hold 60% of quota

Just four companies hold around 60% of Iceland’s fishing quota: Samherji, Brim, KS, and Ísfélagið. Brim reported profits of ISK 11.3 billion [$88.8 million; €82.9 million] last year, and Síldarvinnslan’s profits are similar. In the first three months of this year, Síldarvinnslan has made profits of nearly ISK 4 billion [$31.4 million; €29.3 million]. Samherji, Kaupfélag Skagfirðinga (KS), and other fishing industry giants have not yet submitted financial statements from last year, but similarly high profits are expected.

In a column published in Morgunblaðið yesterday, Minister of Fisheries Svandís Svavarsdóttir stated that the nation viewed the consolidation of fishing quota in so few hands as deeply unjust, and that it felt that this collective resource was not distributed fairly.

Fishing money in other sectors

Opposition MP and Social-Democratic Alliance Chairman Logi Einarsson echoed these words. “We have watched a huge accumulation of wealth in very few hands, which has also led to a small number of individuals not only holding the majority of fishing quota, but due to this same wealth, accumulated assets in many parts of society, in unrelated sectors.” Logi named these sectors as the media, real estate, transport, grocery stores, energy, and even insurance and banking.

“This creates a very unhealthy situation,” Logi continued. “And now that the entire public expects worsening livelihoods and various healthcare and welfare services are underfunded, quota holders should certainly pay more toward public expenditure, they are well capable of it, to say the least.”