Lánamál ríkisins - Company Announcement

National Budget proposal 2016

•         Balanced budget for the third consecutive year
•         Import duties revoked; personal income tax reduced
•         Old-age and disability pensions increased
•         Allocations to housing affairs increased
•         Treasury debt ratio reduced
•         Social welfare system and healthcare strengthened
•         Increased allocations to innovation and development
•         Improved economic outlook with capital account liberalisation strategy

The National Budget proposal for 2016 has been submitted to Parliament. The
proposal provides for a surplus of ISK 15.3bn, for the third consecutive year
with a balanced budget. The primary surplus will continue to be significant, at
ISK 73bn, which is larger than in most other countries at present. 

Real wages have risen rapidly, with low inflation, rising wages, write-downs of
indexed mortgage debt, and reductions of taxes and fees. This policy will
continue. Cancellation of import duties, reductions in individuals' income tax,
and reduction of debt plus a growing operating surplus are the most salient
features of the budget proposal. Also assumed is a new ISK 2.6 bn allocation to
housing affairs and reduced taxation of rental income in order to encourage
long-term renting. Budgetary allocations to healthcare, education, and social
security will increase. 

Cancellation of import duties

Changes in the tax system in 2016 aim at improving living standards in Iceland
still further, while simultaneously enhancing the efficiency of the system. The
main changes centre on individuals' income tax and the cancellation of import
duties on clothing and footwear. The aim is to revoke duties on clothing and
footwear at the end of the current year. It is also planned that all duties
other than those imposed on specified foods be cancelled as of 1 January 2017. 

Cancellation of import duties will have a strong impact on retail prices and
could lower the consumer price index (CPI) by as much as 0.5% in 2016 and up to
1% in 2017. Although households' disposable income will increase as a result,
the measure is also intended to improve the competitive position of retail
trade in Iceland. In all, direct mark-ups imposed by the State on imported
goods will decline by ISK 4.4bn. 

Further information is in attached press release

For National Budget 2016 see website http://www.fjarlog.is

Attachments:

Press release_National Budget Proposal_2016.pdf