Author warns new tourism taxes threaten rural jobs

Jens Garðar Helgason, deputy chairman of the Independence Party and a member of parliament for the Northeast constituency, warns in an opinion article published by mbl.is that the government’s planned tax increases could threaten tourism jobs and businesses across Iceland.

He says it is becoming increasingly difficult to watch the government of Prime Minister Kristrún Frostadóttir raise charges on people and companies while announcing further increases in its new budget. He describes many of the measures as rural taxes because they tend to weigh more heavily on people and businesses outside the capital area.

The government has already increased vehicle excise duties, introduced a kilometre charge for vehicles powered by fossil fuels and raised tariffs by up to tens of percentage points, Helgason writes. He says the changes are particularly damaging to households and companies and are fuelling inflation.

The government now plans to raise value-added tax on bathing lagoons and introduce a new charge for tourists visiting Iceland’s natural attractions, he says. Most bathing lagoons are located outside the capital area, as are the tourist destinations that would be affected by increased charges.

Tourism supports rural communities

About 31,000 people work in tourism across Iceland, with nearly half living outside the capital area, according to Helgason. He describes tourism as one of the most important industries in rural communities and one of the country’s most successful regional development policies.

If the government proceeds with its plans, he says, the foundations of tourism around the country will be seriously weakened and jobs will be put at risk. Tourism creates jobs, he writes, including in his constituency, where four bathing lagoons represent an investment of 20 billion Icelandic krónur and provide about 150 year-round jobs, excluding related employment.

He says bathing lagoons are an important part of the tourism value chain. They give Iceland a distinctive position as a destination, encourage tourists to stay longer in the municipalities and regions where they operate, and are popular both with foreign visitors and Icelanders travelling domestically.

Warnings ignored

Parliament is due to reconvene soon, and the budget for 2027 will be published. Helgason says there are no signs that the government intends to abandon its planned increases in tourism charges. The minister of finance and economic affairs has instead begun publicly defending the planned VAT increase, he writes.

When the VAT increase was announced in the spring, Vök Baths at Lake Urriðavatn in eastern Iceland was among those to raise serious concerns, according to Helgason. The company has said that if the plans become reality, it may have to close the bathing lagoon during the most difficult winter months.

Helgason says these warnings have so far been ignored and criticises rural governing-party MPs for allowing what he calls another rural tax to go ahead. He argues that the planned measures could put jobs in their home communities at risk.