From Iceland — Actual Food Costs 50% More Than Ministry Estimates

Haukur Már Helgason
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According To Report Cited By The Financial Ministry Itself

As already reported, the Ministry of Finance has defended its proposal to raise the VAT on groceries, on the presumption of an individual’s daily food expenses averaging at 250 ISK per meal, roughly equalling $2. The Ministry cited a report from Statistics Iceland as the source for this estimate. The report itself, however, seems to disagree.

As soon as proposed, the figure was widely challenged and derided as unrealistic. Vísir now reports that the Ministry’s figures are based on estimates of the cost of groceries bought in supermarkets only, while the total estimates reported by S.I. include canteens, restaurants and such. Whereas the Ministry’s presumed figure adds up to ISK 89,000 per month for a household of four, Statistics Iceland estimate such a household’s total food expenses around 50% higher, at ISK 135,000.

This contested figure’s current importance has to do with the structure of proposed changes to the tax system. Based on the 250 ISK figure, the Ministry estimates that higher child benefits will weigh enough against the raised VAT so that the proposed changes would, all in all, leave an average family around 1.000 ISK better off each month, as compared to the current setup. If the actual costs of sustenance are higher than those presumed by the Ministry, as seems to be the case, raising the VAT on basic goods would, on the contrary, increase the costs of living for average and lower-income households.

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