Iceland’s EU contribution could reach 90 billion krona

Iceland’s annual contribution to the European Union could reach 90 billion Icelandic krona, mbl.is reports, as the cost of possible EU membership has become a major issue in the election campaign.

The movement Áfram Ísland says annual payments could amount to around 50 billion krona. Its opponents in Já til að sjá compared the figure with the 350 million pounds written on the famous Brexit campaign bus, which was widely criticised as inaccurate.

Calculations by the Icelandic Taxpayers’ Association appear broadly sound as an estimate of Iceland’s potential gross payments to the EU if the country joined. However, they do not establish what Iceland would ultimately have to pay.

The final amount would be negotiated in a membership agreement and would depend on the EU’s revenue system and any possible transitional arrangements. The figure could therefore be lower or higher.

A commonly cited estimate of 2 to 7 billion krona refers to something different. The figure first appeared in a report by the majority of the parliamentary Constitutional and Supervisory Committee, based on a memorandum from the Ministry for Foreign Affairs.

That estimate does not calculate Iceland’s gross contribution. It starts with an estimated net contribution of 10 to 15 billion krona, based on Finland’s experience in the previous century. Around 8 billion krona that Iceland currently pays for cooperation under the European Economic Area are then deducted, leaving an estimated 2 to 7 billion krona in additional expenditure.

This explains both the low estimate and its unusually wide range. An uncertainty of 5 billion krona might be acceptable when assessing an amount of 15 to 20 billion, but it is highly significant when the result is 2 to 7 billion. The range is more of a guess than a margin of certainty, the article says.

Both approaches also have a weakness because they do not fully account for what Iceland already receives through European cooperation. If all current EEA costs are deducted from future payments, any revenues or grants that would disappear would also have to be added back. Otherwise, the increase in expenditure would be systematically underestimated. This issue particularly weakens the ministry’s net estimates, rather than the Taxpayers’ Association’s basic estimate of the gross contribution.

The Taxpayers’ Association calculates the potential contribution by adding up the EU’s revenue sources. Iceland’s contribution based on gross national income is estimated at 27 to 35 billion krona, its share of the value-added tax base at 5 to 6 billion, the plastic levy at 1 to 2 billion and participation in rebates for other net contributors at around 2.5 billion. A further 7 to 8 billion krona in customs revenue would go to the EU.

The resulting gross contribution is estimated at 43 to 53 billion krona, with a midpoint close to 47 billion.