The Prime Minister’s Office and offices for the Cabinet of Iceland in Reykjavik. Source: Wikimedia Commons, APK
Iceland’s new coalition government, formed in December 2024, has decided to fill the country’s chronic budget deficit by reforming the taxation of fisheries, entering into a sharp conflict with the leadership of one of the country’s main economic sectors.
The government is confident that it is right, while critics of the tax increase claim that it is playing “Icelandic roulette” with an unknown outcome.
Hanna Katrín says she is convinced of the validity of the increases. Source: Vísir / Ívar Fannar
Hanna Katrín Friðriksson, Minister of Industry, says the rhetoric of the Association of Fisheries Companies that the planned increase in resource fees in the sector will lead to the closure of fish processing plants is illogical and says the fishing industry is threatening the nation.
She discussed the government’s plans to increase resource fees in the fisheries sector in Sprengisandur on Bylgjan TV-channel on Sunday, April 13.
“We want to stop the fishing industry itself from determining the price that forms the basis for fishing fees. It’s such a crazy method if you really think about it,” she says.
Competitiveness not at stake
Hanna Katrín says that despite the fact that there are often extensive increases in figures, it is considered a small part of the operating profits of companies in the sector. The increases are in some cases affecting smaller operators, but work is being done to raise the tax-free income threshold accordingly to accommodate those operators who take advantage of it.
I am as convinced as I was at the beginning of this journey, after looking at the figures, that we are not at all out of it. Despite everything, this is a small part of the operating profits of companies. This is simply a correction that should have been made a long time ago. We have a very profitable industry. This does not jeopardize competitiveness in foreign markets.
The fishing industry shoots itself in the foot
Hanna Katrín says that government representatives have held many meetings with representatives of the SFS and asked them to present a realistic method for approaching the issue of basing fees on the actual value of the catch, but that no proposal has been received.
She says that the Association of Icelandic Fishing Companies is making threats to the nation that are not supported by evidence. If they let them happen, it would be like the fishing industry shooting itself in the foot.
“However, I sincerely hope that people take it seriously, I’m just going to call it a threat, when representatives declare that this will be their first reaction. It is illogical considering the figures that are available, considering the turnover of this sector, considering the profit, considering the investment, considering the development of equity in this sector and considering investments in unrelated operations,” says Hanna Katrín Friðriksson, Minister of Industry.
Icelandic Roulette
Perhaps, that is the government’s goal in itself—to eliminate profitability in the fishing industry.
Anna Hrefna Ingimundardóttir. Source: Viðskiptablaðið
Increased export earnings and economic growth increase the quality of life for the future. The government must ensure equal conditions throughout the country for growth opportunities and job creation.
These are the emphases of Viðreisn on employment issues, published under the heading “Diversified employment opportunities throughout the country” on the party’s website.
Most people should be able to agree with this. It is therefore surprising that one of the party’s first acts in government is to double the specific tax on one of the country’s basic export sectors, a tax that will also fall particularly heavily on rural areas. Around 80 per cent of fishing fees are paid by fishing companies outside the capital area.
How do we increase export revenues from the fishing industry? When discussing this specific national resource, it is often forgotten that fish in the sea does not become valuable until it is caught, processed, transported and sold. In order for this to happen, billions upon billions must be invested in ships, high-tech equipment, human resources and marketing and sales activities. The fact that fish processing has thrived in Iceland has created valuable opportunities in related sectors, thus increasing export revenues by a significant margin. Doubling fishing fees threatens that situation.
But this is not a tax increase, the government says, and will therefore have no impact on the industry, despite the fact that it is estimated to bring in an additional 9 billion kronor to the state treasury annually. For that amount, it would be possible to invest in one or two new trawlers. What do you think the industry would be like today if its scope for investment in new equipment, development and innovation had been taxed to the point of extinction? The value creation of the national economy would be lower and the profitability of the industry would be poorer.
Perhaps that is the government’s goal in itself—to eliminate profitability in the fishing industry. Then perhaps a consensus can be reached on the industry.
Source:
- Útgerðin skjóti sig í fótinn loki hún vinnslum / Vísir (in Icelandic)
- Íslensk rúlletta / Viðskiptablaðið (in Icelandic)