The 2016 budget was introduced by Bjarni Benediktsson, the minister of Finance at a press conference in the Reykjavík Conference and Concert Centre, Harpan, on Tuesday. The Ministry of Finance is projecting a surplus of 15,3 billion ISK (122 million USD/110 million EUR). The budget is bound to be amended significantly as it proceeds through parliament.
Increasing expenditures
The 2016 budget includes significant increases in expenditures on most ministries and projects. Among the items which receive increased funding are the National University Hospital, the Symphony orchestra and National Theatre as well as the University of Iceland. However, the Icelandic National Broadcasting Service sees its budget cut significantly. The budget also includes 12 billion ISK (93 million USD/84 million EUR) in added expenditures on various new projects, most of these involving support for renters and the construction of public housing.
While expenditures are scheduled to grow, receipts are projected to grow even faster, ensuring next year will be the third in a row to see a government surplus. This year the surplus is on track to become 21 billion ISK (163 million USD/146 million EUR), instead of 3.5 billion ISK (27 million USD/24 million EUR), as the 215 budget had anticipated.
Significant tax cuts
Next year’s budget includes significant tax cuts. Income taxes will be cut in several steps. Taxes in the lowest tax bracket will be lowered from 22.86% to 22.68% on 1 January 2016, and to 22.5% on 1 January 2017. The middle tax bracket will also be eliminated, while the top bracket will be lowered. The effect of these changes are calculated to be greatest for an individual making 700,000 ISK monthly (5,450 USD/4,880 EUR), who will be saving a monthly 12,000 ISK (94 USD/83 EUR) on his tax bill.
Import duties will also be lowered. Duties on shoes and clothing will be abolished on January 1 2016, and then later on other goods, excluding most foods. The goal, according to the Ministry of Finance is to make retail in Iceland competitive, lowering the price of items like clothing to levels similar to those in other Nordic countries.
Some corporate taxes will also be lowered, most notably the tax on electricity.
Lower government debt
Government debt scheduled to continue to shrink over the next year. Government debt is on track to be 62% of GDP by the end of the year. According to the 2016 budget government debt will be 50% of GDP by the end of 2016. The Ministry's goal is to reduce government debt to 40% of GDP by 2019. Government debt grew following the 2008 crash, reaching 85% of GDP in 2011.
The Ministry of Finance points out that the budgetary primary balance, the budget balance before interest payments or receipts, is on track to be the best in Europe. The surplus on the primary balance is five percent in Iceland, when European Union countries have between 3% surplus to a 3% deficit on their primary balance. However, Iceland has higher interest payments than most other European countries, due to significant high-interest government debt. Lowering interest payments is a primary goal for government finances, Bjarni Benediktsson announced.
The 2016 budget was introduced by Bjarni Benediktsson, the minister of Finance at a press conference in the Reykjavík Conference and Concert Centre, Harpan, on Tuesday. The Ministry of Finance is projecting a surplus of 15,3 billion ISK (122 million USD/110 million EUR). The budget is bound to be amended significantly as it proceeds through parliament.
Increasing expenditures
The 2016 budget includes significant increases in expenditures on most ministries and projects. Among the items which receive increased funding are the National University Hospital, the Symphony orchestra and National Theatre as well as the University of Iceland. However, the Icelandic National Broadcasting Service sees its budget cut significantly. The budget also includes 12 billion ISK (93 million USD/84 million EUR) in added expenditures on various new projects, most of these involving support for renters and the construction of public housing.
While expenditures are scheduled to grow, receipts are projected to grow even faster, ensuring next year will be the third in a row to see a government surplus. This year the surplus is on track to become 21 billion ISK (163 million USD/146 million EUR), instead of 3.5 billion ISK (27 million USD/24 million EUR), as the 215 budget had anticipated.
Significant tax cuts
Next year’s budget includes significant tax cuts. Income taxes will be cut in several steps. Taxes in the lowest tax bracket will be lowered from 22.86% to 22.68% on 1 January 2016, and to 22.5% on 1 January 2017. The middle tax bracket will also be eliminated, while the top bracket will be lowered. The effect of these changes are calculated to be greatest for an individual making 700,000 ISK monthly (5,450 USD/4,880 EUR), who will be saving a monthly 12,000 ISK (94 USD/83 EUR) on his tax bill.
Import duties will also be lowered. Duties on shoes and clothing will be abolished on January 1 2016, and then later on other goods, excluding most foods. The goal, according to the Ministry of Finance is to make retail in Iceland competitive, lowering the price of items like clothing to levels similar to those in other Nordic countries.
Some corporate taxes will also be lowered, most notably the tax on electricity.
Lower government debt
Government debt scheduled to continue to shrink over the next year. Government debt is on track to be 62% of GDP by the end of the year. According to the 2016 budget government debt will be 50% of GDP by the end of 2016. The Ministry's goal is to reduce government debt to 40% of GDP by 2019. Government debt grew following the 2008 crash, reaching 85% of GDP in 2011.
The Ministry of Finance points out that the budgetary primary balance, the budget balance before interest payments or receipts, is on track to be the best in Europe. The surplus on the primary balance is five percent in Iceland, when European Union countries have between 3% surplus to a 3% deficit on their primary balance. However, Iceland has higher interest payments than most other European countries, due to significant high-interest government debt. Lowering interest payments is a primary goal for government finances, Bjarni Benediktsson announced.
