Uncertainty over tax hikes hits Iceland's tourism sector

Uncertainty surrounding proposed tax increases and new fees is already affecting Iceland's tourism sector, making it difficult for businesses to price and sell travel packages for 2027. Companies are currently finalizing pricing for their most popular offerings, which include tours of Iceland from February to November.

Bjarnheiður Hallsdóttir, managing director of Katla DMI and former chair of the Icelandic Tourism Association, highlighted the challenges. She noted that businesses need about 18 months' notice to incorporate new costs into their pricing. The lack of clarity on when a value-added tax (VAT) increase for geothermal pools will take effect, and the details of a forthcoming nature and infrastructure fee, are creating significant hurdles.

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We need about 18 months' notice to be able to incorporate such costs into the price.

Specifically, some geothermal pools are hesitant to commit to pricing their services months or even a year in advance due to the VAT uncertainty. This forces tour operators to potentially remove these attractions from their itineraries. Hallsdóttir criticized the government's approach, calling the lack of predictability costly and indicative of carelessness and disrespect toward the tourism industry. She stated that these practices are unacceptable and have long been a source of frustration for the sector.

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This is not a new problem... This is in reality just unacceptable practices by the government, which I am criticizing there, not for the first time and not for the second time, but this is something the industry has become incredibly tired of.