Doing Things Differently (Than in Germany): Iceland Lowers VAT

The Icelandic government has decided on a significant reduction of VAT on groceries starting next year. From March 2007 on, VAT on groceries will drop from 14 to 7% according to the new resolution. At restaurants and taverns, it will plummet from 24.5 to 7%. In addition, there will be VAT reductions on books, magazines, hotel and inn accommodations, as well as heating costs. The Icelandic tourism association was highly pleased with the announcement of the government’s resolution: the reduction of VAT will have a positive impact on the future of the industry and make Iceland even more attractive for tourists from abroad. (eap)