FÍB chief still hopes for renewed fuel VAT cut

Runólfur Ólafsson, managing director of the Icelandic Association of Car Owners, still hopes the government will lower value-added tax on fuel again, mbl.is reports.

A temporary reduction ended at the turn of the month, raising the tax from 11% back to 24%. The cut was part of the government’s measures to tackle inflation and was announced in April.

“Of course I still hold on to hope, but based on what I have seen in interviews with government officials in the media, it seems this will not happen unless it becomes part of the government’s talks with representatives of the labour market,” Ólafsson said.

He said there was still a case for extending the tax cut because conditions had not changed since the government introduced it in the spring. If anything, he said, the situation had worsened.

Average petrol and diesel prices in August were comparable to those in April, Ólafsson said. “The impact on inflation will be negative if nothing changes, as the increase will immediately start feeding into prices,” he said.

Ólafsson has closely monitored fuel prices since the tax increase took effect. He said the change in prices appeared to reflect the VAT increase rather than a change in mark-ups.

He added that the market was subject to increased scrutiny by the Competition Authority, while the Icelandic Association of Car Owners, the Icelandic Confederation of Labour and trade unions had also been monitoring fuel prices.

“There are more eyes focused on this. There was a brief period when the tax changes took place at the turn of the year when a rapid reduction was being presented, but an increase in mark-ups could also clearly be detected. This is a market that clearly needs scrutiny,” Ólafsson said.

Fuel prices can be monitored on the Gasvaktin website.