Iceland introduces road tax for electric cars

Published 28 March 2024
- By Editorial Staff
According to Icelandic politicians, electric cars have so far generated too little tax revenue.

Electric car owners in Iceland will now have to pay road tax per kilometer due to a drop in fuel tax revenues. However, owners of petrol and diesel cars are exempt from the kilometre tax – at least for the first year.

In Iceland, the growing number of electric car owners means fewer gasoline-powered cars. This in turn means less revenue from fuel taxes, which means that the budget for road maintenance and the like is no longer sustainable.

For this reason, Icelandic politicians have introduced a so-called kilometer tax for electric cars, reports tax-funded Swedish state broadcaster SR. For pure electric cars, this means a kilometer tax of six Icelandic crowns, which is about 50 öre. For plug-in hybrids it is two Icelandic crowns. Next year, a kilometre tax will also be introduced for petrol and diesel cars.

It will soon be forbidden to sell new gasoline and diesel cars in the EU, which means that other countries are also discussing vehicle taxes. In San Diego in the USA, for example, such proposals were rejected due to public protests. It has also been discussed in Sweden, as proposed by the IVL Swedish Environmental Research Institute, among others.

– We see that tax revenues are decreasing as more and more of the vehicle fleet is electrified, transportation researcher Anders Roth told SR. In addition, we need to address the issue of acceptance of general taxes, and a road tax can be a good way to make it cheaper to drive in the countryside and a little more expensive to drive in the city.

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