Anyone with a basic understanding of the laws of supply and demand understands that a tax increase like the one included in the bill will have a major economic impact.

Kristinn Jónsson, the mayor of Snæfellsbær, is a shrewd man. In an interview with Spegilinn on the Icelandic National Broadcasting Service last week, he criticized the working methods of the Ministry of Industry and Trade in drafting the fishing fee bill.

Kristinn is surprised that the analysis of the bill does not assess the impact of the increase in fishing fees on local government revenues. There are many pages that discuss the impact of the tax increase on the treasury, but when it comes to other effects, there is complete silence.

The ministry allows itself to conclude that the increase will probably not have a major impact on local government revenues and investments in the fishing industry, but does not provide any data to support these conclusions.

Anyone with a basic understanding of the laws of supply and demand understands that a tax increase like the one in the bill will have a major economic impact. Kristinn has such an understanding. In the interview with the Icelandic National Broadcasting Corporation he says:

If I have to pay more taxes to society, then it must obviously be so that I can spend less money myself on what I want to do, change windows, buy a new garage door, buy a new car or whatever it is, I have less disposable income. Exactly the same thing happens with the companies in the fishing villages.

“It’s as if the members of parliament haven’t read this bill, this is first and foremost a tax. This is not a correction or anything else, it is stated in the text of the bill and it is repeatedly stated that this is a tax. When you impose a tax on someone, it must mean that they have less disposable income and that means, if we just look at the society here in Snæfellsbær, if you take out more money, there is less activity, which must have an impact on the society itself. That’s what I fear, that there will be less activity for the plumber, the electrician, the carpenter, whoever, so I’ll just take some examples. I would have liked to see the impact on the local government revenue of the municipality and I don’t understand why they don’t want to show us with some calculations.”

This presentation is clear and concise. Therefore, it is incomprehensible that officials in the Ministry of Industry and Trade are saying outright that the increase in the cost of fishing that the enactment of the bill will entail will have no effect on other business decisions of companies, let alone on investments and consequently on local government revenue. These are unacceptable working methods.

The government has boasted that the changes to the bill, which, among other things, concerned an increase in the tax-free income threshold and were supposed to benefit smaller fishing companies, since it was submitted to the consultation portal, will meet the criticism that rural municipalities have expressed about the government’s plans.

These changes are nothing more than an illusion. Thus, the board of the Westfjords Authority has expressed serious concerns about the government’s bill to increase the fishing fee. It is clear that the impact of the increase in fishing fees will be “very burdensome and will fall very hard on small and medium-sized fish farms”.

The board’s resolution points out that in the Westfjords there are only small and medium-sized fish farms in the fishing and processing of fish.

“Although the exemption limit has been raised, that increase will be largely eaten up by the increased burden on cod and haddock in the latest amendments to the bill.”

Otherwise, the adoption of this bill will be extremely costly for the Icelandic economy.

Source: VB (in Icelandic)