The new budget bill: 3.5 billion ISK increase in income from property tax

Bjarni Benediktsson, Minister of Finance and Economic Affairs, introduced next year’s budget bill yesterday. The bill includes a deficit of 46 billion ISK on the total state budget next year, which corresponds to 1% of GDP.

The bill states, among other things, that the assessment of income from property taxes should increase by ISK 3.5m, and this is almost entirely due to the strong growth in income from inheritance tax in the current year, which has a fundamental impact on the 2024 budget.

Inheritance tax income rising

Income from inheritance tax has grown consistently over the past few years, and this is not the first time that income from inheritance tax has been reassessed for increase between annual budget plans.

In addition, the overnight stay tax for tourists will be implemented again at the end of the year, which was suspended due to a coronavirus pandemic. It is estimated to bring in an unchanged 1.5 million ISK in the coming year.

Furthermore, there are plans to change the scope of the tax and to impose charges in relation to cruise ship arrivals. Work is currently ongoing with stakeholders, with assessments to be made of different ways of changing the fee and tax environment for the industry. The revenue impact of those changes is estimated to be £2.7m.

Seven billion ISK spending increase

Meanwhile, the expenditure on the issue of applicants for international protection and refugees has also increased significantly, along with the recent increase in the number of refugees.

Total contributions for applicants for international protection and refugees are expected to be approximately around ISK 15 m.

The increase amounts to ISK 7 million in real terms between years, which includes contributions for food and housing costs, reimbursements to local authorities and agreements on coordinated reception of refugees.

Charges not calculated with pricing assumptions

Changes in charges are not attached to prices, unlike the previous year as they went hand in hand with pricing assumptions due to the inflation.

Thus, they will only update at 3.5% year-on-year, by which time the taxes are about ISK 3m lower than if they had been priced in. As a result, the charges will be impaired in real terms year-on-year, although government revenues will rise by ISK 3.4m as a result of the change.

The value premium for sea farming will be increased from 3.5% to 5% of the market price for products.

Finally, the budget bill introduces a new two-stage revenue collection system for traffic and energy exchange in the form of roadside tax for the use of cars. There will be a reduction in incentives for buyers and owners of electric cars.