The Icelandic tourism sector welcomes the new government’s decision not to raise VAT but expresses concern over the potential impact of proposed facility and resource fees. The Director of the Icelandic Travel Industry Association has urged clarity and careful planning to avoid negative effects on profitability and investment.
Concerns within the tourism sector
In an interview with Vísir published yesterday, Jóhannes Þór Skúlason, the Director of the Icelandic Travel Industry Association, stated that the new government’s policy had raised some worries within the tourism sector. Jóhannes did, nonetheless, express relief that the government does not plan to increase VAT on the sector.
“I want to congratulate the new government. It’s great to see this process move so quickly,” Jóhannes Þór Skúlasons stated. “Of course, the policy statement doesn’t go into great detail in some areas,” he remarked.
As noted by Vísir, the new three-party coalition plans to achieve its tourism-related goals by “promoting value creation, safety, and visitor management in tourism. The country’s most popular tourist destinations are owned by the nation, and the government intends to introduce a resource fee for tourist access to Iceland’s natural attractions. While the details are being finalised, facility fees will be collected.”
Jóhannes explained that tourism touches many areas of government administration, and how the proposed measures will be implemented remains unclear. “We look forward to working with the new Minister for Tourism. I’m very optimistic about her,” Jóhannes remarked, referring to Hanna Katrín Friðriksson, the new Minister of Economic Affairs.
As noted on the government’s website, the Ministry of Economic Affairs will assume responsibility for tourism in Iceland.
Ministry of Economic Affairs
The Ministry of Food, Fisheries, and Agriculture has been renamed the Ministry of Economic Affairs. Responsibilities for trade, consumer affairs, and tourism have been transferred to the ministry from the Ministry of Culture and Trade.
Dual taxation on the agenda
“As for the specific points mentioned regarding tourism,” Jóhannes continued, “I’m especially pleased about what isn’t mentioned – namely, that VAT on tourism will not be increased.”
As noted by Vísir, this point was emphasised during a press conference yesterday.
“However, we still need to understand how the government plans to implement the other proposed fees – facility fees (komugjöld) and resource fees,” Jóhannes Þór continued. “That’s something we need to examine carefully. I can’t deny that there has been some unrest in the sector today over having both fees on the agenda. We would like to see more detail about how these ideas are being approached,” Jóhannes observed.
Jóhannes noted that both of these fees would constitute new forms of taxation, which could significantly impact the sector’s profitability. “In an industry where profitability isn’t remarkable, people naturally question how this will affect them. It’s also critical to consider the timeline and preparation for implementing such fees.”
Challenges of arrival fees already known
Jóhannes also pointed out that facility fees had been repeatedly discussed in the past, with experience showing that such fees are often more complex to implement than they seem: “We’ve often pointed out that it’s more practical to levy fees on tourists already in the country rather than on aspects influencing their choice of destination,” Jóhannes remarked.
Jóhannes iterated that he looked forward to discussing these issues with the new minister, noting that extensive work had been carried out from 2018 to 2019, including studies on arrival fees, which provide insights into potential challenges. He emphasised that these insights must be thoroughly reviewed.
Jóhannes also suggested that resource fee proposals are likely tied to the tourism plan approved in the spring, but details remain uncertain.
Potential negative impacts
“I sense that there are questions about the broad new taxation proposals for the industry. I think it’s fair to say this: when faced with such measures, people naturally pause and wonder how they align with the government’s stated goals of supporting value creation in the industry.”
“These goals don’t necessarily align,” Jóhannes continued. ‘The outcome depends entirely on the implementation, timeline, and preparation. If the plans remain vague, people may hold off on investments, which could have various negative effects. So, it’s crucial that this is handled properly,” Jóhannes concluded.
“There are indeed concerns after today about the significant new taxation being considered for the industry, which my colleagues are not particularly enthusiastic about,” Jóhannes concluded.
This post was originally published on here
