Iceland wants to reform its tourism tax policy to combat overtourism

Iceland wants tourists flock to bubbling hot springs, picturesque icebergs and moon-like lava landscapes – but without harming residents or the natural environment.

The small Nordic country famous for its fire and ice is not alone. From Amsterdam ARRIVE VeniceGlobal hotspots there take measures to try to suppress negative effects of overtourismwhile still retaining an extremely important source of income.

“We are still trying to build a tax system for the future tourism industry,” Iceland Prime Minister Bjarni Benediktsson told CNBC via video conference.

“We want to move more toward a system where users pay,” Benediktsson said. As I see it, we want to direct more towards the entry fees to the magnets, as we call them, around the country.”

“That way, we can control the traffic. So when demand is high, we can have higher tariffs and we can control by modifying the fees during the day or between months or during periods of the year. But this is still a work in progress.”

The Icelandic government has restored the so-called tourism tax at the beginning of the year, looking to raise funds for sustainable programs and minimize the environmental impact of mass tourism.

The levy was suspended during the Covid-19 pandemic, imposing a nominal fee of 600 Icelandic krona ($4.34) for hotel rooms, with different charges also applied to campsites camps, mobile homes and cruise ships.

Benediktsson described the reintroduction of his predecessor’s tourism tax as an “important decision” for the country. However, he said the government needs to go further to find the right balance.

The head of Iceland’s right-wing, pro-business Independence Party, Benediktsson replace Katrin Jakobsdóttir as prime minister in early April. He previously served as prime minister in 2017.

His second term as the country’s leader comes at a time when the country is grappling with soaring interest rates, high inflation and a series of financial crises. volcanic eruptions.

Late last month, a volcano in southwest Iceland erupted. fifth time since DecemberErupting lava once again threatens the coastal town of Grindavik.

Seismic activity also forced the evacuation of one of the country’s most visited sites, the Blue Lagoon geothermal spa. Since then the lagoon has existed reopen to tourists after authorities said the eruption had stabilized.

Iceland’s tourism industry has recovered strongly from the downturn caused by the coronavirus pandemic. Country – where there is population about 383,000 — expectation welcoming 2.3 million visitors this year, nearly 2.4 million in 2025 and up to 2.5 million in 2026.

Revenue generated by tourism is increasingly important to the Icelandic economy.

Indeed, tourism accounts for 8.5% of gross domestic product by 2023, according to Statistics Iceland, citing preliminary data from the Tourism Satellite Account. This is up from 7.5% in 2022 and exceeds the average of 8.2% recorded in the pre-Covid period between 2016 and 2019.

Looking ahead, Benediktsson said the government is working on its own “sustainable balancing checks” to develop the tourism tax system.

“We have come up with a system by which we look at certain indicators: Is nature in balance at a certain point? Is society satisfied with development? That’s the green light , yellow light or red light?” Benediktsson said.

“If we see those places are being damaged due to the number of people visiting, for example in Geysir, where we have hot springs, then we need to take action,” he added.

“Those are the things we are trying to develop and we are trying to follow the indicators and make sure that the industry grows in good acceptance by society as well as by nature.”