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Beat the Icelandic VAT Hike

Iceland. At first glance, you could be forgiven for thinking I’m writing about a popular supermarket chain that specialises in frozen foods. However, I’m referring to the Nordic country.

The Icelandic government plans to increase the VAT rate from 7% to a monstrous 25.5% from 1 May, 2013. This new increase is set to affect all areas of tourism in Iceland, Europe’s most sparsely populated country. 

The plans to treble VAT on accommodation, restaurant meals and attractions in Iceland have been condemned by travel operators around the world. According to the European Tour Operators Association (ETOA), foreigners occupied 90% of the country’s hotel rooms in July, 2012. 

Once considered an expensive holiday destination, Iceland changed perceptions in 1997 by reducing tourism-related VAT to 7%, which helped boost visitor numbers to 210,000 in that year. That figure increased to almost 600,000 in 2011, and is expected to rise by a further 16% this year. 

The plans could see a large spike in tourist numbers as people rush to Iceland before the increase, and a dramatic fall in the following months. ETOA chief executive Tom Jenkins comments, "It penalises any operator who has signed contracts and published brochures featuring Iceland next year. No company can absorb such a surcharge."

The news comes two years after the 2010 eruption of the Eyjafjallajökull volcano, which heightened international interest in the country. Iceland is famed for its natural and geological beauty, taking the 2012 Lonely Planet title of Readers’ Choice Award for Best Destination.

Beat the VAT increase and visit Iceland with a free whale-watching tour

Assistant Producer Luke Doyle contributed to this post.

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Tips by

Deal Expert, Manchester
Wednesday, 7 November 2012
See more Tips from
Chris Webber