Icelandic alcohol producer complains about too-high tax

The Icelandic government takes 90 percent of the sale price of vodka, the president of the country’s biggest drinks company says — claiming that the black market for illegally produced home made hard liquors is thriving as a result.

Alcohol taxes in Iceland have always been high because of the dangers posed by alcohol abuse. However, since the economic crisis hit in 2008, alcohol tax has been raised several times and has reached a never-before-seen level.

According to spirits, beer and soft drinks producer and distributor Olgerdin Egil Skallagrinson, around 90 percent of the cost of one litre of Tinda vodka goes to the state in the form of VAT, alcohol duty and the state monopoly wine shop’s own cut. RUV was able to confirm the figures with the state alcohol monopoly.

A one litre bottle of Tinda vodka costs ISK 6.200 (EUR 38.90)at the Vin Budin shop. Of that around ISK 3,800 (EUR 23.84) is alcohol duty and ISK 1,260 (EUR 7.91) is value added tax. Vin Budin keeps ISK 500 (EUR 3.14) itself and there is a ISK 14 (EUR 0.09) return fee for the glass bottle.

This leaves the producer of the spirit with ISK 580 (EUR 3.64).

“This is clearly an extremely high tax and contributes to the fact that the country is flooded with illegally produced alcohol, and it is that that we are competing with,” says Olgerdin director Andri Thor Gudmundsson.

He says that the rise in illegal alcohol can be seen in his own company’s sales figures. In recent years the amount of vodka sold has gone down by 36 percent, compared to just a 13 percent drop in gin sales.

Gudmundsson told RUV that competitive companies would never consider increasing the price of a product in a declining market because people just stop buying the product and look elsewhere…to the black market in the case of vodka.

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