Icelandic government finances are strong, according to the government's 2018 budget bill. Next year's budget surplus is expected to be 44 billion ISK (410 million USD/350 million EUR), 4 billion ISK (40 million USD/30 million EUR) more than initial plans had envisioned. The surplus is 5% of total government revenue and 1.6% of GDP.
Read more: Iceland has fifth highest per capita GDP in Europe, 29% above EU average
While most of the extra revenue will be used to pay down government debt, the government has also announced it will increase spending on healthcare, especially mental health, investment in infrastructure as well as pledging more funds to fight climate change.
Increased spending on healthcare
Benedikt Jóhanneesson, the minister of finance introduced the key items of the 2018 budget which the government plans to submit to parliament next week. Benedikt told the Icelandic National Broadcasting Service that while paying down government debt is a priority, the budget would make every effort to prioritize social spending.
Read more: Study: Icelandic health care system the second best worldwide
Among the major new spending items outlined in the budget proposal Benedikt introduced was a pledge to begin the construction of a new National University Hospital next year, as well as spending more on mental health, especially help for young people suffering from mental diseases. One of the steps the government has announced is the hiring of psychologists to offer mental health services at all high schools.
Higher carbon tax and subsidies for electric cars
Another notable item in the budget is a doubling of the carbon tax levied on transportation fuels. The price of petroleum is expected to rise by 8 ISK per liter and that of Diesel fuel by 18 ISK (0.30 and 0.64 USD per gallon/0.06 and 0.14 EUR per liter). Currently the lowest price of a liter of 95 octane gasoline at Reykjavík gas stations is 177.6 ISK (6.32 USD per gallon/1.4 EUR per liter) and 167.8 ISK for a liter of Diesel fuel (6 USD per gallon/1.32 EUR per liter).
The goal of the tax increase is to generate more revenue for the state, while at the same time reduce the consumption of fossil fuels.
Read more: Share of new electric and hybrid cars in Iceland second highest in Europe
At the same time the government has announced it will extend tax breaks for electric cars. Several years ago the government abolished import duties and sales taxes on electric cars. These tax-breaks have been approved only one year at a time, which has created significant uncertainty for car dealerships. Making the tax-break permanent encourages sales of electric cars by allows dealerships to make better long term plans.
Icelandic government finances are strong, according to the government's 2018 budget bill. Next year's budget surplus is expected to be 44 billion ISK (410 million USD/350 million EUR), 4 billion ISK (40 million USD/30 million EUR) more than initial plans had envisioned. The surplus is 5% of total government revenue and 1.6% of GDP.
Read more: Iceland has fifth highest per capita GDP in Europe, 29% above EU average
While most of the extra revenue will be used to pay down government debt, the government has also announced it will increase spending on healthcare, especially mental health, investment in infrastructure as well as pledging more funds to fight climate change.
Increased spending on healthcare
Benedikt Jóhanneesson, the minister of finance introduced the key items of the 2018 budget which the government plans to submit to parliament next week. Benedikt told the Icelandic National Broadcasting Service that while paying down government debt is a priority, the budget would make every effort to prioritize social spending.
Read more: Study: Icelandic health care system the second best worldwide
Among the major new spending items outlined in the budget proposal Benedikt introduced was a pledge to begin the construction of a new National University Hospital next year, as well as spending more on mental health, especially help for young people suffering from mental diseases. One of the steps the government has announced is the hiring of psychologists to offer mental health services at all high schools.
Higher carbon tax and subsidies for electric cars
Another notable item in the budget is a doubling of the carbon tax levied on transportation fuels. The price of petroleum is expected to rise by 8 ISK per liter and that of Diesel fuel by 18 ISK (0.30 and 0.64 USD per gallon/0.06 and 0.14 EUR per liter). Currently the lowest price of a liter of 95 octane gasoline at Reykjavík gas stations is 177.6 ISK (6.32 USD per gallon/1.4 EUR per liter) and 167.8 ISK for a liter of Diesel fuel (6 USD per gallon/1.32 EUR per liter).
The goal of the tax increase is to generate more revenue for the state, while at the same time reduce the consumption of fossil fuels.
Read more: Share of new electric and hybrid cars in Iceland second highest in Europe
At the same time the government has announced it will extend tax breaks for electric cars. Several years ago the government abolished import duties and sales taxes on electric cars. These tax-breaks have been approved only one year at a time, which has created significant uncertainty for car dealerships. Making the tax-break permanent encourages sales of electric cars by allows dealerships to make better long term plans.
