Icelandic government delays vehicle kilometre tax implementation beyond year-end

The Icelandic government will delay the proposed vehicle kilometre tax, with the decision expected to be pushed beyond the end of the year. This decision comes as a majority of the Economic and Trade Committee suggests that the matter requires more thorough analysis and consultation before progressing.

Originally, the kilometre tax was set to be implemented from January 1, aimed at compensating for the loss of revenue due to the electrification of Iceland’s vehicle fleet, with an estimated yield of 7 billion Icelandic krónur in the upcoming year. However, committee members have expressed concerns over the extensive changes proposed in the bill, which led to the recommendation of sending it back for further government review.

Additionally, the committee proposes extending the provision allowing for tax-free withdrawals from special savings accounts for housing loan payments until the end of 2025. This provision was introduced in 2014 and was scheduled to expire at year-end.

The parliament session is anticipated to conclude next week, with committee chair Njáll Trausti Friðbertsson stating that adjustments are underway to respond to recent changes affecting revenue sources, such as the kilometre tax. The committee expects to finalize their review of the proposal later today, highlighting the need to address these pressing issues.