Posted by: neilh10 | April 27, 2011

Taxing the tourists: A great idea.

The Reykjavik Grapevine are reporting that surcharges might be placed on certain popular tourist destinations in Iceland, this year.

Geysir (Tourists at Geysir. From Flickr).

There are no confirmed plans as yet, but it would make a lot of sense.

Iceland has historically been considered a prohibitively expensive place to visit for foreign tourists. As a result, the tourist industry has been geared up for ‘once in a lifetime’ type adventurers – people with a lot of money but little time.

However, the fact of the matter is that Iceland was never really that expensive. You could always visit the country very cheaply by renting a car, shopping at the supermarket, and camping. Most of the villages still have free campsites, and the facillities (eg swimming pools and most public transport) have generally been free or at very little cost. As I have pointed out before, the nature is the country’s best attraction, and this is absolutely free.

My sense is that the Icelanders are deeply proud of their nature and there will undoubtedly be a lot of resistance to charging visitors to experience it. However, this stance is not sustainable in the long term. Iceland is now one of Europe’s top destinations for tourism and the costs of visiting the country are roughly similar to the rest of Western Europe. People are heading en masse up to Iceland to check it out.

As a result, this year, there are predictions of 600,000 foreign visitors to Iceland. That is great news in principle, but it is not much good if the only contribution these visitors make to the economy is renting a second hand car and shopping in Bonus. All that does is create pollution and clog up the roads.

Basically, in my view, the Icelandic government need to maximise all the revenue they can get out of the tourists, whilst minimising the environmental impact of tourism. Introducing new taxes is one way in which this can be achieved. However, it will only work if the revenue is spent wisely and directly correlated to the original tax. For instance, charging people entrance fees to major tourist sites could allow the government to create a conservation fund that would help preserve the environment and create new skilled jobs in the countryside in nature conservation.

If implemented wisely, the introduction of surcharges for tourists to visit Icelands major tourist attractions could be the start of a great thing. There are many other areas of the visitor economy that could be taxed. For instance, a new tax on car hire could be introduced, with the revenues going to help develop public transport in Iceland, reducing dependency on the car.

Another idea I had was to introduce an additional tax on second home ownership in Iceland, similar to the tax that was introduced in Ireland last year. My proposal was that this tax could go in to a fund supporting the development of the creative industries in the Icelandic countryside, so holiday home owners could do their bit to support the people who live in the countryside year round.

I went to present this idea to an acquaintance who works in the government. He just laughed at me.

“no one likes paying tax”, he said.

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