The Icelandic government intends to revive its plan to impose a tourist tax on foreign visitors. Finance minister Bjarni Benediktsson hopes to increase the government’s revenue by 2.5 billion ISK per year by charging a new tourist tax. The tax scheme is scheduled to take effect in 2020 but has not been executed any further.
This is Benediktsson’s third attempt to impose a tourist tax; he first proposed a tourist tax in 2014, then as finance minister, in the form of a much criticized ‘nature pass’ following a recommendation made by the Boston Consultant Group back in 2013; a second proposal was made in 2017, when he served as prime minister, to increase the value added tax on tourism from 11 per cent to 25 per cent. In both instances, the proposal was rejected by members of parliament. Lawmakers did however triple the tax on hotel stays in 2017 in a bid to increase government revenues.
The current tax proposal was included in the newly published government budget, where revenues and spendings for the next four years are put forward. There it was recommended that air passengers be charged a small additional cost upon arrival and departure. This method of taxation was also discussed in 2014 in connection to the aforementioned ‘nature pass’ but was greatly criticized as EEA rules don’t allow for domestic flights to be excluded from the taxation. People worried that a rise in domestic ticket prices will greatly affect demand. Many domestic routes receive financial support from the government because they are not considered financially sustainable despite high ticket prices. One can therefore say that the tourist tax discussion has come full circle with the finance minister’s latest proposal.