Here is some sobering news for you: Tax on alcohol is higher in Iceland than in any other European country, and if the budget bill is approved, it will go up another 4.7 percent in the New Year, according to RÚV.
Let’s look at the price of a bottle of Vodka. It is ISK 7,300 (USD 65, EUR 62), 94 percent of which goes to the Icelandic state. In other words, only the price of a tiny sip, or ISK 434, goes to the producer or the importer. The rest is divided as follows: alcohol tax is ISK 5,419; bottle deposit is ISK 20; Vínbúðin, the state-run liquor store, gets ISK 705; and value added tax is ISK 724.
Ólafur Stephensen, managing director of the Icelandic Federation of Trade, find this level of taxation ridiculous. “This is so outrageous that even though the producer donated the bottle to ÁTVR [the state- run Vínbúðin liquor store], the bottle would still cost close to ISK 7,000, just because of the alcohol tax, the markup of ÁTVR, and the value added tax which is added on top. This, of course, makes no sense,” Ólafur opined.
If you want to pay proportionally lower taxes through your consumption of alcohol, you could opt for a bag-in-box container of wine. Drinking wine from this sort of packaging reminds Icelanders of milking cows. Therefore, we always refer to those boxes as ‘cows,’ or ‘beljur’ (singular: ‘belja’). A ‘cow’ costs you ISK 5,700 (USD 51, EUR 48) — ISK 909 of which goes to the producer or importer. Only 84 percent of the price of a ‘cow’ goes to the Icelandic state.