[icelandic logic] food prices down, alcohol up

Here’s a perfect example of the type of government interference which makes Tim Worstall and Chris Dillow fume, only this time in Iceland:

Minister of Finance Árni M. Mathiesen submitted a bill yesterday aimed at lowering food prices after 1 March next year. If passed, the price of alcoholic beverages would rise. The bill includes the abolishment of excise taxes on food products and the lowering of VAT to 7 percent. As a consequence, the VAT of alcohol will also go down to seven percent, automatically lowering the price of alcohol as well. Fréttabladid reports.

Mathiesen said the purpose with the bill had been to lower food prices, not alcohol prices, as the tax decrease on alcohol would deprive the state budget of an income of several ISK billions (ISK 1 billion = EUR 11 million, USD 15 million). To prevent that, the government has decided to raise the price of alcoholic beverages. The cost of some brands of beer could go up by 17 percent. The Federation of Trade & Services and The Icelandic Travel Industry Association have objected to the government’s plans.

At least the government is being honest about it. They didn’t try to claim it was to prevent the spread of alcoholism or to protect children – they admitted it was to rake in the kroner.