Recent Halt in Domestic French Fry Production Raises Questions Concerning Tariffs

import tariff iceland french fries

When Icelandic frozen- and ready-made food company Þykkvabæjar stopped producing french fries earlier this summer, they were the last remaining producer of the popular side dish in Iceland.

Now, with no domestic producers left, all french fries in Iceland must be imported. The lack of domestic production, however, has raised questions over what, exactly, protectionist tariffs are protecting.

In a recent report by the National Association of Employers, it came to light that Icelandic consumers have paid a total of ISK 800 million in french fry tariffs in the past two and a half years.

Those imported from Canada and the EU are taxed at a rate of 46%, and french fries from elsewhere are taxed at a much higher 76%. Given the growing share of the tourism and service industries, this cost is not trivial.

The National Association of Employers has petitioned the Minister of Finance to repeal the tariffs, stating that they no longer protect anything and only hurt the consumer.

Ólafur Stephensen, managing director of the National Association of Employers, has cited the french fry tariff as one more unnecessary burden. During a time of high inflation, he stated, such burdens should be minimized as far as possible: “These numbers clearly show that there is a lot at stake for Icelandic consumers, the trade and the restaurant sector to abolish this protectionist tariff that no longer protects anything. The duties amount to 300-400 million per year and at a time when food prices are constantly rising, such sums make a difference.”

Ólafur, along with other consumer-advocacy groups, has since called on the Minister of Finance to repeal the tariff.

 

 

Government Approves Pandemic Grants for Bars and Restaurants

bar beer alcohol

Iceland’s government has approved measures in support of restaurant and bar owners that have experienced a loss of income as a result of COVID-19 restrictions, RÚV reports. Owners will soon be able to apply for a so-called “rebound” grant up to a maximum of ISK 10-12 million [$77,900-93,400, €68,500-82,200], Foreign Affairs Minister Þórdís Kolbrún Reykfjörð Gylfadóttir stated following a cabinet meeting this morning.

“We’re doing this specifically for those parties who have a liquor licence and have experienced a loss of income due to [COVID-19] infection prevention measures,” Þórdís told reporters. Asked whether the grants would be enough to keep bars and restaurants running, the Minister stated that she could not be the judge, but she believed the initiative would make a big difference. The government has also postponed insurance and tax payment deadlines for restaurants in order to ease financial strain on the industry.

The rebound grants are expected to cost the government around ISK 1.5 billion [$116.8 million, €102.7 million]. Þórdís stated that the government was also considering measures in support of freelance and culture workers, other groups that have been hit hard by pandemic restrictions.

Icelandic authorities tightened domestic COVID-19 restrictions last week, closing bars and clubs and extending operational restrictions on restaurants as the country fights its biggest ever wave of COVID-19 infection. Some restaurateurs have criticised the closures and restrictions, pointing to the fact that schools remain open, despite being a source of infection spread. Bragi Skaftason, who operates three restaurants in Reykjavík, has stated that reintroducing partial employment benefits, a pandemic response measure the government has discontinued, would be more helpful to restaurateurs than the government’s current economic response measures.