Deloitte says government overestimates revenue from bathing lagoon tax hike

The government may overestimate revenue from a planned increase in value-added tax on bathing lagoons by 1.8 billion Icelandic krona, according to a Deloitte analysis reported by mbl.is. The government forecasts the change will raise 4 billion krona for the state treasury next year.

Under the plan, admission to bathing lagoons and steam baths would move from the 11% VAT rate to the standard 24% rate. Deloitte estimates the increase would raise about 2.2 billion krona, based on bathing lagoon companies’ 2025 accounts, unchanged ticket prices and other factors remaining the same.

The analysis was commissioned by the tourism industry association Samtök ferðaþjónustunnar and submitted to parliament as additional comments on the budget bill and related tax changes. Deloitte cautioned that the comparison is not exact: its analysis uses 2025 operations, while the government’s revenue estimate is for 2027. Tourist numbers, prices and company responses could change in the meantime.

Profits could fall by up to half

Deloitte also calculated how three bathing lagoon operators would have fared in 2025 if they had absorbed the entire tax increase instead of raising ticket prices. The Mývatn Nature Baths’ profit would have fallen from 210 million krona to 118 million, a 44% decrease. Vök Baths’ profit would have dropped from 107 million to 69 million, or 35%.

The largest impact would have been on GeoSea, a bathing lagoon in Húsavík. Its profit would have fallen from 49 million krona to 24 million, a decrease of 52%.

Deloitte said the companies would likely pass at least part of the tax increase on to customers. If they passed on the full increase, ticket prices would rise by almost 12%.

The planned change has faced strong opposition in the tourism industry. Operators of the Hvammsvík sea baths, Laugarás Lagoon and Vök near Egilsstaðir have said they may shelve or postpone expansion plans because of the tax increase.