Fuel tax cut set to expire as prices and inflation rise

A temporary reduction in value-added tax on fuel is due to expire at the end of the month, meaning the rate will return from 11% to 24% unless the government takes action, mbl.is reports.

Runólfur Ólafsson, director of the Association of Icelandic Car Owners, said he would have expected the government to respond to rising prices by reducing fuel taxes.

The timing is considered particularly difficult because any decision to extend the reduction would likely have to wait until at least mid-September, as parliamentary involvement is required.

The provision took effect on 1 May as part of the government’s measures to combat inflation and respond to global oil price increases linked to the war in Iran.

Ólafsson said he was concerned about the situation if the authorities did not intervene. World fuel prices were trending upwards, he said, while collective agreements contained red lines and inflation remained at an uncomfortable level.