Raising the price of alcohol by 20% with taxes is still not enough to deter Icelanders from buying it in ever-increasing amounts.
According to research conducted by Bifröst University, spending on alcohol in March actually increased by 14.4% – despite an increase of alcohol tax that raised the price by 20%.
Some of this may be explained by the Easter holidays – for many, lasting five days – happening in March. Further research may shed more light on this.
Taxes were recently raised in cigarettes and alcohol to generate revenue on the one hand, and to help pay for health care costs incurred by people who drink and smoke on the other. Conservative MPs argued that the raise was unfair during a time of hardship, while the government contended that revenue is desperately needed, and for that, there are two tools at one’s disposal: making cuts in the budget and raising taxes.
Bifröst, a business school in west Iceland, regularly does research on consumer spending.