Fuel tax cut ends as motorists call for extension

A temporary cut in value-added tax on fuel ended at midnight, raising the rate from 11% to 24%, mbl.is reported. Runólfur Ólafsson, executive director of the Icelandic Automobile Association, said there had been grounds to extend the measure because market conditions were broadly unchanged from when it was introduced.

Long queues formed at petrol stations on Monday as drivers filled up before midnight, saving several hundred Icelandic krónur.

“We are disappointed that the authorities did not extend this measure, because the market is in no way different now from when it began,” Ólafsson said.

The temporary VAT reduction was part of the government’s measures to combat inflation and was announced in April.

Ólafsson said average global prices for both petrol and diesel were similar to those in the spring. He said extending the reduction could therefore have helped influence domestic prices.

“We do not control global prices or events abroad, but we control prices here through taxation,” he said.

Hoping for another reduction

Finance Minister Daði Már Kristófersson said in August that any continuation of the VAT reduction would have to wait until at least mid-September because Parliament would need to take part in the decision and was in recess.

The opposition parties said they were prepared to return from the summer recess for a parliamentary session to extend the measure.

Parliament is due to reconvene in one week. Asked whether he believed fuel VAT might be reduced again, Ólafsson said he intended to remain hopeful.

Prices rise in line with tax increase

Fuel prices can be monitored on Gasvaktin, a fuel price monitoring website. It shows petrol selling for about 224 to 262 krónur per litre in most places, while diesel costs about 260 to 290 krónur.

“The increase appears to correspond to the VAT increase,” Ólafsson said, adding that he had monitored prices since midnight.

He said consumers were unlikely to face further increases beyond the tax change, as he considered it unlikely that the oil companies would raise prices by more than the VAT increase.

He pointed out that the companies are currently under review by the Competition Authority.