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The heavy yoke of the sin tax

So we got slapped with hikes in so-called “sin tax” last Friday, more specifically tax on tobacco, alcohol and gas [although since when is driving your car a sin?]. Nicelanders scrambled to the liquor stores to stock up on booze before the price hike, only later to be informed that the increase won’t properly come into effect until suppliers order more from abroad [d’oh!]. Personally I don’t care about taxes on smokes and booze since I don’t smoke and don’t drink much, but like many others I was dismayed to see the price of gas go up by around 15 crowns per litre, to around ISK 180 [USD 1.47 / EUR 1.03 – and there are about two litres to a gallon].

Of course it was bound to happen – the government is going to have to come up with the funds somewhere to cover our massive debt, and this is probably the least-unpopular way of starting out on that long and treacherous journey [obviously this is just a drop in the bucket – there are still lots more price hikes and cutbacks to come.]

The problem with this – which a lot of people are wery wery upset about – is that it pushers up the consumer price index, which is the index used as a guideline for the increases in the principal on our mortgages and other loans. With this increase alone, a mortgage of ISK 20 million [USD 164,000 / EUR 115,000] goes up by ISK 200,000 [USD 1,600 / EUR 1,150], effective pretty much immediately. So once again, it’s the little people who have to shoulder the burden.

Some people – YT included – have been wondering why they couldn’t just remove this particular factor from the measurement of the price index, at least this time around, to avoid this nasty side effect. I have to confess I’m not well informed enough to know if it’s even possible – but it certainly would have made sense. Although abolishing indexation of mortgages altogether would make infinitely more sense.

Anyway, my favourite cartoonist summed it up brilliantly, as  usual:

bidid

We’ve got the little people climbing the steep hill of the kreppa carrying [from top] UNEMPLOYMENT, DEBT and HOPELESSNESS, as old Jóhanna [PM] comes running up behind them with alcohol and petrol tax shouting: “Wait! Take this with you while you’re at it”

Harr harr. [Sniff.]

MEANWHILE, BACK AT THE SALT RANCH
Friends: yet again I am forced to amend my glowing review of my recent fish and chips experience at American Style on Tryggvagata. EPI and I went there last night after a concert, both of us really hungry, and ordered the same thing as last time. As before, the place was spotless, the service great, but the food was … uh, pretty awful. The coating on the fish tasted like the chef had accidentally dropped a salt mine into it and decided to use it anyway. Seriously, it was so salty that it would have been completely inedible had we not been so famished. Consequently, instead of sending it back to the kitchen like we should have done, we scraped off as much of the coating as we could and imbibed it anyway. Sorely regretted it later, of course, as I was completely bloated and nauseous driving home, and on the inside felt kind of like Lot’s wife after she turned into a pillar of salt.

Incidentally, we complained on the way out, and received a blank “oh” from the pubescent girl working behind the counter. So be forewarned: proceed with caution when ordering the fish and chips at American Style. It can be hit or miss.

IT’S BEEN CLOUDY AND THREATENING TO RAIN
all day today. It’s not going to rain, though, and I know this because my neck is not killing me. Seriously, my neck is the best barometer for imminent rain that I know. Right now it is 8°C [46F], sunrise this morning was at 3.20 and sunset due for 11.33 this evening.

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  • Ljósmynd DE June 2, 2009, 9:34 pm

    I would expect more things defined as sin by the government to broaden the tax base in the future.

    For me the fuel price converted to EUR doesn’t sound that bad, I have paid more in Iceland before and I’m paying more in Germany now (I think it should be about 3.9 litres to the US gallon). But it’s different in ISK and very upsetting that this is once again pushing up the principal on the mortgages.

    I have read that there is only a 10% flat tax on dividends and interest income for individuals, which in comparison to other countries appears very low. Wouldn’t it be reasonable to increase those taxes before jumping at the consumer taxes?

    And btw. – nice new logo, is this the arctic tern cut out of the photo?

  • Jessica June 2, 2009, 10:10 pm

    I could sort of defend the tax on cigarettes and alcohol. After all, people don’t really NEED those to survive. (But those things certainly make a person feel better in a kreppa) As for the gas tax though, it would only make sense if Iceland had a real ALTERNATIVE to driving. Unfortunately people in rural areas can’t help it and certainly the Reykjavik bus system is no efficient way to get to all the places you need to go. Living in Garðabær, it takes me an entire hour just to get to the University of Iceland. That’s only about 10 kilometers away. And that’s if the buses are running on schedule. And sorry, but I don’t enjoy biking 10 km in hurricane winds and freezing rain. Thankfully we’re moving downtown soon and won’t be driving around so much ; ‘ ) Now if only we could still afford a beer…

  • JD June 2, 2009, 10:24 pm

    Major bummer about American Style. Had it on the agenda for a cheapo fish and fries meal. Now where to go?

  • alda June 2, 2009, 10:31 pm

    LDE – yes indeed, capital gains tax is very low here. And yes, they should raise it – and if I’m not mistaken, they plan to. Trouble is, there isn’t much capital gains left to tax.
    And yes – the kría is from a photo I took out on Seltjarnarnes yesterday. 🙂

    Jessica – well said! Perhaps they put tax on gas because it’s a guaranteed source of income. They can’t go wrong.

    JD – does it have to be fish and chips? If so, that kind of limits your options. :-/

  • JD June 2, 2009, 11:14 pm

    No Alda, it doesn’t have to be fish and chips. Was just looking at a quick, cheap option that would please two “slightly” picky boys. I could eat lamb and fish for every meal there, but we’re open to any good spot. Santa Maria for cheap Mexican maybe?

  • alda June 2, 2009, 11:23 pm

    JD – I would give Santa Maria a wide berth, personally.
    There are lots of good places in the downtown area. A few that are reasonably priced and good: Hornið (Italian), Shalimar (Indian/Pakistani), Krua Thai (er, Thai), American Style for burgers. I’ve also been hearing great things about a place called Saffron, in the Glæsibær mall (not really central, but not far out either – near Laugardalur, where the big pool is). They do good, tasty, healthy food at really good prices.

    Perhaps other readers can add some suggestions …

  • Lee, UK June 3, 2009, 12:14 am

    When Iceland eventually joins the Eurozone, I suppose it will no longer be allowed to index its loans?

    Perhaps other readers can add some suggestions
    For the best fish-and-chips-with-vinegar-and-mushy-peas experience: IcelandAir to Gatwick, train to Brighton, and taxi to Bankers Fish Restaurant!

  • JD June 3, 2009, 1:54 am

    Great suggestions, thanks much. (Grapevine gave Santa Maria a pretty glowing review, but I can see how an alternative paper would love a cheap Mexican place) We had the Laugardalur pool on the short list of things to do, so Saffron will work nicely.

  • John Hopkins June 3, 2009, 3:44 am

    4 liters per gallon +/- actually the price doesn’t sound so bad when in non-ISK currencies…

  • Finnur June 3, 2009, 4:30 am

    You’re conversions are a bit off. 🙂 Just Google it (“how many liters are in a gallon”): 3,79 liters (in a US gallon) and 4,55 liters (in an imperial gallon).

  • Bromley86 June 3, 2009, 7:24 am

    Perhaps I’m wrong, but my first thought was that, as well as taxing sin, taxing these things will help improve the balance of payments.

    I seem to remember some talk of Iceland having hydrogen-powered cars in the future. Was this an Icelandic venture? If it was then it could further help with the BoP at a time when the oil price seems to be recovering.

    Has there been any talk in Iceland of where the pain should fall? Well, other than on the heads of the super rich 🙂 .

  • Annie June 3, 2009, 7:30 am

    I managed fine for four years in Iceland with a bicycle and no car. And there is already a perfectly good bus system in Reykjavik, Icelanders just have this weird thing about taking a bus – it’s only for foreigners, alcoholics, and retarded people apparently.

  • alda June 3, 2009, 10:31 am

    Lee – here’s hoping!

    John, Finnur – I stand corrected! thanks. Slight confusion with my conversion there. :8

    John – actually the price doesn’t sound so bad when in non-ISK currencies — are you telling me US residents wouldn’t balk at paying almost $8 per gallon of gas??

    Bromley86 – yes, there was /is a hydrogen venture here and moreover Icelanders could easily become sustainable in terms of electrical cars. As for your suggestion, no idea since I don’t know what BoP is.

    Annie – you caught on quick to Icelandic bus habits, I see. 🙂

  • Bromley86 June 3, 2009, 1:44 pm

    Balance of Payments 🙂 .

  • kevin o'connor waterford Ireland June 3, 2009, 4:06 pm

    Price of Fuel €1 a litre here in Waterford basically euro standard price thereabouts time to get the cooking oil out shame TESCO restricts you to 3 litres per purchase !!!

  • Phil June 3, 2009, 9:45 pm

    Now your experience of American Style sounds more like mine. Frankly, the burger that I had there was the most boring one I’ve ever had, and I have no idea why the place is called “American Style.” And the pubescent girl with the blank “oh” response– this type of attitude, and accompanying dodgy food quality, is far too common here (Hroi hottur is in the same vein, speaking of wide berths).

    The best burgers in town are at Hamborgarabullan. Burger, fries, Coke, and a shake makes for an excellent, comforting, and inexpensive (by Icelandic standards) meal (the “tilbod aldarinnar”), burger, fries, Coke, is only 1090 kr.) . The atmosphere is laid back, the posters on the wall are interesting, there is always a paper to read, and the staff are always friendly– they always say “Thanks” as you walk out the door.

    Geysir used to do fish n’chips with the fish wrapped in newspaper, and the quality was decent as well. Nowadays, if I ever get round there (as I managed to do this evening), it would be the seafood soup and seafood salad, both with scallops and langoustine, excellent. Not too expensive but certainly more pricey than good old Bullan! The service there is always excellent.

    There’s always lobster soup and bread at Saegreifinn– especially good on a dark, cold, blowy, snowy, rainy winter afternoon or evening. Cozy and relatively inexpensive. And a couple of the servers there are among the nicest that I’ve ever encountered in Iceland.

    Krua Thai– very quick service, excellent food, relatively inexpensive… only drawback is that if you eat there, you come out with a lasting smell of Thai food on your clothing, because the ventilation system there is awful.

    Finest restaurant meal that I’ve had in Iceland– at Tjoruhusid in Isafjordur. Best fish ever, anywhere, ever. Amazing fish dishes, awesome service, fun “rustic” atmosphere. In second place, simply because one has to follow the other, was the kjotsupa (lamb soup) at Hali in Sudursveit (near Hofn). Perfect. And accompanied by liver pate, smoked lamb, and smoked trout, all produced there… just fantastic. That, in my opinion, is the best of the best of Icelandic food, and it’s a real pity that it is not available elsewhere, at a decent price, particularly in Reykjavik.
    And I’ve only ever used a bike in Reykjavik– can get everywhere and anywhere quickly and easily– though some parts are a bit hilly (like in places out in Kopavogur). The trail system in Reykjavik is excellent– the seaside trail from Vesturbaer to Kopavogur or on through Fossvogur is outstanding, and an easy way to get from one side of town to the other… goes all the way out to Arbaer and beyond. I bike every single day all year round, no matter what the weather– but it is disconcerting to hear kids shout “Thad er bannad ad hjola um veturna”– riding in winter is prohibited! It’s a pity, I think, because really there’s nothing funner than biking in snow. Just be careful on black ice.

  • alda June 3, 2009, 10:12 pm

    Phil – I beg to differ on most accounts! Re. Hamborgarabúllan – personally I find the burgers at American Style better. I agree about the smell of your clothes after eating at Krua Thai – sadly that’s my experience with Búllan too. The “bræla” is awful in there! (But the service is great.) I’ve eaten at Geysir once and could barely stomach the soup, it was so salty. And I agree that Sægreifinn is great – but unfortunately I’ve heard less-than encouraging things about the hygiene. :-/

  • Phil June 3, 2009, 10:23 pm

    Hi Alda!

    Conclusion: consistency in Icelandic restaurants= non-existent? 🙂 Or just people’s tastes differ…

    I used to love Thrir Frakkar, 10 years ago. Went a couple of years ago and found it just awful.

    Do try Tjoruhusid if you’re ever in Isafjordur. It was a completely different dining experience than any I’ve had here. And the kjotsupa in Hali– brilliant.

    (Actually Saegreifinn can sometimes give a bit of a weird stomach afterward, and sometimes not.)

    Best wishes,
    Phil

  • Physchim62 June 4, 2009, 9:59 am

    EUR1.03 for a litre of gasoline is still pretty cheap compared with other countries.
    As for the indexing of domestic mortgages: which ever criminal thought up that idea to rip his own people off, he should be dumped into Þingvallavatn and forgotten about. Hopefully the recapitalization of the new banks should be completed this week (six months late), so maybe the government will have the guts to break the index-linking after that.