One of the fallouts of the meltdown here in Iceland an increase in all sorts of taxes. This was predictable enough and is, obviously, a way for the state to compensate for loss of revenues and the growing national debt.
The new tax law was pushed through parliament in a big rush just before Christmas. One of its implications is that those who run small private limited companies – like YT – face pretty hefty tax increases, over and above the regular income tax increase. Basically it means that the tax paid on the company’s revenues increases from32% to around 50%.
It should be noted that the abovementioned increase almost exclusively affects the little man – i.e. those companies who have only one permanent employee. As a result, many of us who are in this position are rushing to alter the legal form of our companies before the changes take effect.
Most of us had no idea of this change until it hit the news over the holidays, and now we have three days before the end of the year to respond. Consequently YT has spent a fair amount of time on the blower, trying to access various types of information.
I’ll spare you the details of the unbelievably boorish reception I received from the legal advisor at the District Commissioner’s Office – the first port of call for new registrations. Suffice it to say that the woman went out of her way to make things difficult, in addition to being just plain rude. The epitome of the frustrated bureaucrat.
After about 30 minutes on the phone in total I had managed to extract from her only about 1% of the information I needed, so I moved on to the next port of call – the Company Registrations department of the National Tax Office. There I got excellent service – got all the information I needed literally within three and a half minutes. [I swear the staff of the tax office was sent on a public relations course a few years back – they used to be the Crusty Dinosaurs of the Icelandic public administration system but that changed virtually overnight and they are now, as a rule, amazingly accommodating and helpful. The Crusty Dinosaur title has clearly been assumed by the District Commissioner of Reykjavík. But I digress.]
One of the bits of info that the Crusty Dinosaur lawyer was not willing to provide [I say “willing” because it transpired during the conversation that she actually knew a lot more than she was choosing to share] was that the fee for registering a new company will likely go up by around 50% in a few days’ time – i.e. in the new year. Fifty fricking percent! The fee is hefty enough already, particularly for those of us who work solo and whose operations are pretty limited in the whole scheme of things – right now, it costs ISK 88,000 to register a new PLC plus all the supplementary fees you pay for registration, etc. etc. — so probably around ISK 100,000. At today’s exchange rate, that’s USD 800 / EUR 550. A 50% increase is … well, you do the math. The fee for a SF company is a little bit lower, or around ISK 62,000 with everything, and will also likely go up by 50% in the new year.
To me, this kind of strategy kind of defies logic when you’re trying to rebuild an economy. First, by increasing taxes on small companies that are way out of proportion to other increases, and second, by making it more difficult than before for people to establish new companies. Here I thought New Iceland was supposed to be about fostering innovation and nurturing seed companies – but, alas, it seems to be more about letting the Big Fish get off scot free and playing musical chairs with many of the main players in the collapse.
We all expected tax increases and most of us were prepared to take the hit – but it seems to me that this new government, which started out with such promise, is making a lot of ill-informed and illogical decisions. I don’t manage to write about most of what’s going on [for that I would probably need a staff of about 50], but suffice it to say that in a lot of ways they seem to be fumbling around in the dark, which is very disheartening. I definitely prefer them to the Independence Party and all their ilk and I am firmly in favour of a left-of-centre government, but in my view they need to become a bit more adept at walking those fine lines, including the one between raising taxes and stifling entrepreneurship.
IT’S BEAUTIFUL AND SNOWY
And very cold. Right now it’s -4C and windy [windchill alert!] which would make it 25°F. The sun came up at 11.22 and will set at 3.37.