MP says mileage charge rise threatens tourism sector

A nearly 16% increase in Iceland’s kilometre-based vehicle charge will add costs for car rental companies, Independence Party MP Guðlaugur Þór Þórðarson told Morgunblaðið, warning that the government’s policies amount to a “direct attack” on tourism.

Car rental companies are responsible for collecting the charge from customers on the government’s behalf, he said. Höld estimates it pays 25 million krónur a year in card transaction fees. Its experience collecting the charge from customers renting hybrid and electric cars shows that only 70% to 90% of the amount is recovered, leaving the company to cover at least 140 million krónur. The company’s direct costs related to the charge are estimated at about 165 million krónur.

Hertz estimates the direct cost to the car rental industry as a whole could reach between 1 billion and 1.8 billion krónur, Guðlaugur Þór said. That figure does not include the costs of changing systems and procedures, hiring more staff or informing customers.

The kilometre-based charge is due to rise again at the turn of the year. Guðlaugur Þór said this was only an early indication of further costs, pointing to a planned nature and infrastructure charge for tourists visiting natural attractions in South Iceland. The charge is expected to raise 7 billion krónur annually, including 5 billion next year, with collection due to begin in May 2027.

He said surveys show visitors are generally satisfied with Iceland apart from the high prices, and criticised the government for increasing charges while allocating 600 million krónur to a marketing campaign intended to encourage visitors to spend more. He also questioned whether visitor numbers would remain as high after the increases.