Visitors to Iceland could be hit with increased costs from next year, after the government announced proposals for a three-fold rise in VAT on accommodation, restaurant meals and tourist attractions.
The country, best known for its hot springs, geysers, active volcanoes and its vibrant capital Reykjavik, attracts hundreds of thousands of visitors each year.
Official figures reveal that international tourism is on the increase in the country, with foreign visitors accounting for 90 per cent of total guest nights in hotels in July, up by 13 per cent compared with July 2011.
Tour operators have argued that the planned VAT increase, from 7 per cent to 25.5 per cent from May 1 2013, may deter holidaymakers from visiting the country.
“Iceland [had been losing] its perception as an expensive destination. This tax rise effectively punctures that impression,” said Tom Jenkins, chief executive of the European Tour Operators Association (ETOA).
Iceland’s long-held reputation as a costly destination was shattered in the wake of the global economic crisis and the collapse of the country’s central banking system. These factors heralded a sharp decline in the value of the krona against both the pound and the euro.
The eruption of the Eyjafjallajökull volcano in 2010, sparking travel chaos across Europe, also heightened interest in Iceland from overseas travellers.
Reflecting figures from Statistics Iceland, the country‘s centre for official statistics, the ETOA said that visitor numbers to the country have soared.
More than half a million tourists visited Iceland in 2011, and this figure is expected to rise by a further 16 per cent this year.
“What is strange is that Iceland has been a textbook example of the virtues of cutting indirect taxation in tourism,” added Mr Jenkins.
“In 2007, it halved tax on tourism services from 14 per cent to seven per cent. By 2008, tax receipts from tourism were 6 per cent higher than they had been in 2006.”
(images: 350.org, Andreas Tille, luispabon)
