Billions Lost through Foreign Gambling Websites

currency iceland

Icelanders spend an estimated ISK 20 Billion [$146 Million, €134 Million] on foreign gambling websites every year. This leads to a tax revenue loss of up to ISK 7 Billion [$51 Million, €47 Million], according to the CEO of one of Iceland’s six legal gambling operations.

Addiction a problem

In an interview with Morgunblaðið, Bryndís Hrafnkelsdóttir, CEO of HHÍ, a gambling operation whose proceeds fund the University of Iceland, said that foreign gambling websites like Coolbet, Bet365, and Betsson operate without public oversight and that their proceeds do not benefit Icelandic society.

“Authorities need to take on illegal gambling, which has been allowed to happen in Iceland for too long,” Bryndís said, adding that gambling addiction is a big problem in Iceland, especially among young men. “The problem doesn’t disappear if we introduce harm reduction for addiction and will only increase if nothing is done. The gamblers will find another way and move from legal gambling to the illegal foreign sites which will cause money to stream out of the country instead of going towards good causes domestically.”

Profits for social causes

HHÍ has been operating for 90 years and funds the building and maintenance of the University of Iceland’s campus. Six Icelandic companies have a license for gambling operations in Iceland and their proceeds all go towards social causes, such as education, youth groups or sporting activities.

Legislation Still Pending on the Taxation of Facebook and Google

Minister Lilja Alfreðsdóttir

Imposing a tax on ad revenue collected by foreign tech companies such as Facebook and Google is urgent, the Minister of Culture and Business Affairs told RÚV yesterday. Ad payments to foreign companies totalled approximately ISK 369 million ($2.6 million / €2.4 million) in 2009 and have gradually increased to total nearly ISK 9.5 billion ($67 million / €62 million) in 2021.

Taxation still the plan, Minister of Culture and Trade says

Efforts have long been made to impose a tax on foreign tech giants such as Facebook and Google, which collect a large share of domestic ad revenue – but pay no taxes in Iceland. This creates something of a void in the operation of Icelandic media companies, as well as the state treasury, RÚV notes.

In September 2018, then Minister of Education Lilja Alfreðsdóttir, called a press conference to discuss plans to strengthen the Icelandic media environment by reducing RÚV’s activities in the advertising market and by imposing taxes on foreign tech companies.

“This is precisely why we’re proposing a uniform tax on national and foreign online media because a lot of this ad revenue is leaving the country. It’s not just us who are facing this challenge but our neighbouring countries, too,” Lilja observed just over four years ago.

RÚV echoed these statements to Lilja Alfreðsdóttir – who now serves as the Minister of Culture and Business Affairs – in an interview yesterday. The minister responded thusly:

“We decided to provide operational support to private media companies in Iceland, which was an important step. We’re currently reviewing the tax environment of media companies and taking into account developments abroad. But as I stated in 2018: the time is now, and we’re still working according to that plan.”

Foreign ad revenue rapidly increasing

As noted by RÚV, Statistics Iceland has compiled an overview of the distribution of advertising funds between domestic and foreign media. In 2013, the ad revenue of foreign media increased significantly at the expense of domestic companies. That trend has continued. In 2021, for example, when profits were expected to rebound following COVID, domestic ad revenue increased by 14%, while the ad revenue of foreign companies increased by 34%.

Statistics Iceland has also monitored ad payments to foreign companies, which in 2009 were approximately ISK 369 million ($2.6 million / €2.4 million) but increased to almost ISK 9.5 billion ($67 million / €62 million) in 2021. The institution honed in on ad payments made via credit cards, usually originating from smaller companies, or smaller ad campaigns, where foreign tech giants like Facebook and Google play a significant role. Their share of ad revenues has increased from 29% in 2009 when the total revenue was ISK 153 million ($1.1 million / €991,000); to 89% in 2011, when the total revenue was ISK 371 million ($2.6 million / €2.4 million). In 2021, their share of ad revenue was 95%, when total payments amounted to ISK 4.6 billion ($32 million / €30 million). The two companies paid no taxes in Iceland.

Uncertain whether legislation will be passed this year

Given the global nature of the issue, RÚV notes, the government has collaborated with other countries within the OECD on how to tax this revenue.

“I hope that we’ll find a solution because there are many domestic companies that rely on a fair competitive position against these international giants,” Finance Minister Bjarni Benediktsson told RÚV in 2021.

Lilja Alfreðsdóttir stated that resolving the issue was an urgent matter but was unwilling to promise that such legislation would be passed this year.

“It’s difficult to say. I hoped it would see the light of day in 2019, and then the year after. But then, of course, the attention of most governments shifted to the pandemic. But I feel like there’s a greater understanding of how urgent this is today.”

New Year, New Fees: Important Changes in 2023

hallgrímskirkja reykjavík

With the new year, several new regulations, taxes, and fees are coming into effect. Here, we break down the most significant changes for the nation and capital region in 2023.

New Fees on Fuel, Alcohol

In line with the 2023 budget, the alcohol tariff is set to rise some 7.7.%. The price hike will also disproportionately affect alcohol sold in Duty Free, which was taxed at 10% last year, but will now be taxed at 25%.

Fuel is likewise increasing in price. In order to fund infrastructure, the general cost of car ownership is rising significantly. A litre of petrol is set to increase by ISK 16 (0.11 USD, 0.11 EUR), and import duties on electric vehicles are also increasing.

Schools and Pools

In line with the expected 4.9% cost of living increase throughout Reykjavík, the price for admission to the city’s pools will also be increasing, from ISK 1,150 (8.10 USD, 7.58 EUR) to ISK 1,1210 (8.52 USD, 7.98 EUR). Children’s prices are increasing by similar amounts, although residents can still save significantly with pool passes.

The cost of preschool registration will also be rising on average from ISK 33,570 (236 USD, 221 EUR) to ISK 35,215 (248 USD, 232 EUR).

Changes in Recycling

Changes are also coming to waste management and recycling in the capital area.

Icelanders will now need to sort their trash into four bins, and recyclables will no longer be tolerated in the black bin (for trash). Bins will now be sorted into paper, plastic, organic waste, and mixed waste.

Alongside these changes come increases in cost, with garbage removal fees in Reykjavík increasing by 20%.

Read more about coming changes in the 2023 budget here.

 

2023 Budget to Include 7.7% Hike on Alcohol

At a bar in Reykjavík Iceland, drinking beer.

In the latest draft of the 2023 budget, a 7.7% increase in alcohol tax is proposed.

Iceland already has some of the highest alcohol taxes in the world, and critics within the restaurant industry claim that the latest tax hikes will make Iceland less attractive as a tourist destination, and put unnecessary stress on an already-struggling industry.

In a report by the Icelandic Federation of Trade, it is stated that under the new tax structure, a common box of wine will increase on average by ISK 600, a bottle of liquor by some ISK 700, and a six-pack of beer some ISK 150.

Especially affected will be alcohol sales in Duty Free, which are currently taxed at the lower rate of 10%. Under the new structure, alcohol taxes will be raised to 25%, a 150% increase. In Duty Free, the same box of wine will increase by ISK 1,800, a bottle of liquor by ISK 2,300, and a six-pack of beer by ISK 240.

In an editorial on Vísir, Aðalgeir Ásvaldsson, director of the Association of Companies in the Restaurant Industry (SVEIT), states that the increased taxes will have to be built into prices, which will in turn contribute to high inflation. Aðalgeir critiqued the new budget plan, saying that high public fees and COVID restrictions have been extremely damaging to the industry which is so important to tourism. “The restaurant industry wants to contribute to society,” Aðalgeir stated. “We offer good food and drinks, create thousands of jobs and play an important role in shaping the culture of the country. We have had to endure much recently, but now enough is enough.”

Currently, 92% of the price of a bottle of liquor comes from state taxes, compared to 73% of the price of a bottle of wine, and 61% of the price of a can of beer.

As the budget draft currently stands, the tax hike on alcohol would represent an increase in ISK 1.64 billion to the treasury, and total income from alcohol tax for 2023 is projected to sit around ISK 25 billion.

The 2023 budget proposal has also come under recent critique for new taxes and fees levied on fuel, road tolls, vehicle imports, and other costs of owning a vehicle in Iceland. The increased taxes will represent a 36% increase in state revenues from transportation, but critics say that the increased prices will hurt the lowest-income Icelanders, with no accompanying expansion of public transportation. Despite the tax increases, however, the budget is still expected to yield a deficit of some ISK 89 billion, an improvement over the previous year’s ISK 169 billion deficit.

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.

 

 

Directorate of Health Proposes 20% Sugar Tax

soft drinks

The Directorate’s new action plan calls for imposing a 20% sugar tax on soft drinks and sweets, RÚV reports. Kjartann Hreinn Njálsson, assistant to the Director of Health, says that implementing this tax is important for the country’s long term goals in public health.

Ireland, France, Norway, and Mexico, are just a few of the countries which have taxed soft drinks and other sugary products mostly in an effort to reduce their consumption and improve public health. Iceland also previously implemented a sugar tax of 5% that was eventually repealed.

Higher tax more likely to succeed

“When this was last tried [in Iceland], sweetened soft drinks rose in price by only around ISK 5 per litre, while chocolate lowered in price because the existing taxes that applied before were higher than those applied due to sugar,” states Kjartann. “Now it is suggested that the increase be 20% […] so that consumers feel the increase.” Kjartan says there is evidence that informing consumers and encouraging healthier choices are not enough to decrease sugar consumption. Lowering the price of healthy food products needs to follow as well.

“Given how high the level of sugar consumption is here in the country and what a serious public health issue it is to consume too much sugar, for society as a whole, we believe the sugar tax is very important,” stated Kjartan.

Taxing TVs and running shoes

Several parties have put forth arguments against the sugar tax, questioning its efficacy and pointing to potential negative side effects. Icelandic Federation of Trade Director Ólafur Stephensen has suggested that the tax works against recent efforts which have streamlined food taxation, and would increase overhead costs for businesses. In addition, he points out that research on sugar taxes around the world has shown contradictory results and there are many indications such taxes are ineffective.

The sugar tax is also paternalistic, Ólafur adds. “It’s so incredibly difficult when governments are starting to decide what is healthy and what is unhealthy for us and change the price of things in order to control consumption. If taxes are to be applied to this end then there should be high taxes on TVs and low taxes on running shoes.”