Fuel prices set to rise as VAT cut expires

Fuel prices in Iceland are set to rise tomorrow as value-added tax on fuel returns to 24 percent from 11 percent, mbl.is reports. The tax was temporarily reduced in early May as part of government measures to combat inflation.

The timing has drawn criticism because the temporary authorisation expires while Parliament is not sitting. Any decision to extend the reduced rate will therefore have to wait until at least mid-September, as parliamentary approval is required.

The temporary tax reduction was intended to be passed on to consumers in full through lower retail fuel prices. The Competition Authority was tasked with monitoring compliance, but said in a discussion paper published in early July that it could not confirm that the reduction had been fully reflected in final prices in every case.

Opposition parties said in mid-August that they were prepared to call Parliament together to extend the lower VAT rate. However, the Social Democratic Alliance and the People’s Party did not support convening Parliament.

Costco currently has the lowest petrol price, at 191.1 Icelandic krónur per litre, followed by Orkan at 201.1 krónur. The same pattern applies to diesel, which costs 224.3 krónur per litre at Costco and 234.3 krónur at Orkan.