Icelandic municipalities call for reform in capital income tax system

The President of the Association of Icelandic Municipalities has called for a reform to the current capital income tax system, suggesting that a portion of this tax should be allocated to local governments. Heiða Björg Hilmisdóttir emphasizes that the existing tax structure does not promote the financial sustainability of municipalities.

Highlighting the need for change, Hilmisdóttir pointed out that recently published data showed the highest capital income earners from the previous year, amounting to over 67 billion Icelandic krónur. While these individuals contribute to capital income tax, this revenue does not benefit local municipalities unlike regular wage taxes.

The association has long advocated for local governments to receive a share of capital income tax revenues, insisting that high-income earners should contribute to their communities proportionally to their earnings. Hilmisdóttir stated, “There is an urgent need to broaden and strengthen the revenue sources of municipalities, ensuring that those with significant financial gains contribute fairly.”

She insists that raising taxes on those primarily earning capital income is crucial for empowering local governments and creating a fairer society. Furthermore, she calls for a comprehensive review of municipal revenue sources to guarantee their independence and sustainable funding. “It is essential that we all participate in financing the public infrastructure that is vital for everyone,” she added.