Iceland Plans Higher Bank Tax and Increased Tourist Fees

Iceland’s 2027 budget proposal includes a higher bank tax and increased charges for tourists as part of measures expected to bring the state about 34 billion krona in additional revenue next year.

The Finance and Economic Affairs Ministry said the changes aim to restore balance to public finances after a combined deficit of 866 billion krona in recent years. The ministry said the burden should be distributed so that those with the greatest ability to contribute do so, while improved tax compliance, fewer exemptions and the closure of loopholes also form part of the plan.

The government argues that balanced public finances would support a slowdown in inflation and create better conditions for lower interest rates. Improved finances would reduce the state’s borrowing needs, lower the debt ratio and cut future interest costs, according to the ministry. That would create more room for public services, infrastructure investment and responses to unexpected shocks.

State debt is expected to reach about 2,100 billion krona at the end of next year, or nearly 38% of gross domestic product. The stated goal is for the debt ratio to begin falling in the following years, reducing the state’s interest burden and creating lasting room for infrastructure and welfare spending.

“Responsible public finances are a prerequisite for a strong foundation to lead to improved living standards,” Finance and Economic Affairs Minister Daði Már Kristófersson said. He also said Icelandic households had shown considerable resilience, while inflation and interest rates continued to take a toll. The ministry said correcting the deficit would help the state contribute to the fight against inflation and strengthen the economy’s ability to withstand shocks.

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Responsible public finances are a prerequisite for a strong foundation to lead to improved living standards.