VZCZCXRO4097
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DE RUEHRK #0223/01 3571346
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P 231346Z DEC 09
FM AMEMBASSY REYKJAVIK
TO RUEHC/SECSTATE WASHDC PRIORITY 4242
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
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UNCLAS SECTION 01 OF 02 REYKJAVIK 000223 
 
SIPDIS 
 
SENSITIVE 
 
TREASURY FOR NORTON 
NSC FOR HOVENIER 
COMMERCE FOR DERSTINE 
 
E.O. 12958: N/A 
TAGS: GTIP PGOV PREL ECON EFIN IC
SUBJECT:  PARLIAMENT PASSES A BEVY OF BILLS BEFORE THE NEW YEAR 
 
REFS: A) Reykjavik 219 B) Reykjavik 202 C) Reykjavik 198 D) 
Reykjavik 176 
 
REYKJAVIK 00000223  001.2 OF 002 
 
 
¶1. (U) Summary:  The Icelandic Parliament worked diligently in the 
days leading up to its holiday recess and passed a number of key 
pieces of legislation.  Over the weekend of December 18-20, 
parliament passed 18 bills including a new environmental tax and 
amendments to the General Penal Code that clarify Iceland's 
definition of trafficking in persons.  On December 21, parliament 
passed a heavily debated tax bill that is expected to generate an 
additional ISK 44 billion ($343.2 million) in revenue in 2010.  The 
following day, parliament passed a controversial budget bill that 
slashes government services and social spending.  The parliament 
then adjourned for a short holiday recess. It intends to reconvene 
next week and may vote on the Icesave bill at that time.  End 
Summary. 
 
¶2. (U) The Icelandic Parliament worked diligently over the weekend 
of December 18-20 and passed an astounding 18 bills in the two-day 
period.  The most notable bills include a new environmental and 
resource tax which will add a charge of ISK 0.12 (0.0009 cents) per 
each kWh of energy sold and a two percent charge to the retail price 
of hot water.  The government will also assess an ISK 2.60 to ISK 
2.90 (2 cents) carbon tax on each liter of diesel oil, gasoline and 
jet fuel.  In addition, the legislature passed amendments regarding 
the contract to build an aluminum smelter in Helguvik, Southwestern 
Iceland, shortening the duration of the contract to 20 years and 
limiting tax exemptions.  Parliament also amended provisions on 
garnishment of assets, terrorism, organized crime, human trafficking 
and money laundering in the General Penal Code.  The Icelandic 
definition of trafficking in persons now mirrors the Palermo 
Protocol to the UN Convention against Transnational Organized Crime 
and thus clears the road for the protocol's ratification by 
parliament early next year. 
 
¶3. (U) The tax bill passed by parliament on December 21 is expected 
to generate an additional ISK 44 billion ($343.2 million) in revenue 
in 2010.  Among the increases, the VAT will be raised by one 
percentage point to 25.5 percent, making it the highest VAT in 
Europe.  Parliament also expanded the personal income tax structure 
to three tiers:  annual income less than ISK 2.4 million ($18,700) 
will be taxed at 24.1 percent; income of ISK 2.4 - 7.8 million 
($18,700 - $60,800) will be taxed at 27 percent; and, income over 
7.8 million ISK ($60,800) at 33 percent.  The capital gains tax will 
increase from 10 to 18 percent, and corporate taxes from 15 to 18 
percent.  Other taxes expected to affect consumers' wallets include: 
an average 14 percent tax on sugary products and restaurant 
activity; a 10 increase in automobile fees; and a 10 percent 
increase in alcohol and tobacco fees. 
 
¶4. (U) Parliament passed the 2010 budget on December 22 with 33 
votes for the bill and 27 abstentions.  No member of the opposition 
voted in favor of the budgets passage.  Kristjan Juliusson, an MP in 
the Independence Party, criticized the coalition for having "given 
up" on the budget and said the government should have identified 
more cost saving measures.  Press reports, however, quote Finance 
Minister Steingrimur Sigfusson as saying that the budget results are 
very acceptable given the limited possibilities.  With the passage 
of the 2010 budget, the government projects a ISK 98.9 billion ($770 
million) deficit for 2010, a balanced budget for 2011 and a surplus 
by 2013. 
 
¶5. (U) Parliament intends to reconvene next week amid rumors that it 
will vote on the Icesave bill before the New Year.  These rumors 
became more credible when the budget committee voted the Icesave 
bill out of committee on December 22, effectively clearing the way 
for a final vote.  The Icesave bill has been stalled in parliament 
for almost two months as the opposition, using filibustering 
techniques, delayed discussion on the controversial topic. 
According to media reports, the opposition would like even more 
discussion of the topic; however, it appears as though the coalition 
government does not want the issue to linger into the new year and 
intends to put an end to it now. 
 
¶6. (SBU) Comment: The passage of so many bills, of which a large 
number are quite controversial, in such a quick and decisive manner 
signifies a change in the tactics of the ruling coalition.  Up until 
now, the coalition has allowed the opposition to have its say, even 
though it meant dragging out issues for months on end and delaying 
the nation's economic recovery.  It is unclear whether the coalition 
has the votes to pass the Icesave agreement next week; however, the 
coalition appears to want to resolve many of the thorniest issues 
from 2009 and start with a fresh slate in the new year.  End 
comment. 
 
REYKJAVIK 00000223  002.2 OF 002 
 
 
WATSON