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Cablegate: Parliament Passes a Bevy of Bills Before the New Year

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TAGS: GTIP PGOV PREL ECON EFIN IC
SUBJECT: PARLIAMENT PASSES A BEVY OF BILLS BEFORE THE NEW YEAR

REFS: A) Reykjavik 219 B) Reykjavik 202 C) Reykjavik 198 D)
Reykjavik 176

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1. (U) Summary: The Icelandic Parliament worked diligently in the
days leading up to its holiday recess and passed a number of key
pieces of legislation. Over the weekend of December 18-20,
parliament passed 18 bills including a new environmental tax and
amendments to the General Penal Code that clarify Iceland's
definition of trafficking in persons. On December 21, parliament
passed a heavily debated tax bill that is expected to generate an
additional ISK 44 billion ($343.2 million) in revenue in 2010. The
following day, parliament passed a controversial budget bill that
slashes government services and social spending. The parliament
then adjourned for a short holiday recess. It intends to reconvene
next week and may vote on the Icesave bill at that time. End
Summary.

2. (U) The Icelandic Parliament worked diligently over the weekend
of December 18-20 and passed an astounding 18 bills in the two-day
period. The most notable bills include a new environmental and
resource tax which will add a charge of ISK 0.12 (0.0009 cents) per
each kWh of energy sold and a two percent charge to the retail price
of hot water. The government will also assess an ISK 2.60 to ISK
2.90 (2 cents) carbon tax on each liter of diesel oil, gasoline and
jet fuel. In addition, the legislature passed amendments regarding
the contract to build an aluminum smelter in Helguvik, Southwestern
Iceland, shortening the duration of the contract to 20 years and
limiting tax exemptions. Parliament also amended provisions on
garnishment of assets, terrorism, organized crime, human trafficking
and money laundering in the General Penal Code. The Icelandic
definition of trafficking in persons now mirrors the Palermo
Protocol to the UN Convention against Transnational Organized Crime
and thus clears the road for the protocol's ratification by
parliament early next year.

3. (U) The tax bill passed by parliament on December 21 is expected
to generate an additional ISK 44 billion ($343.2 million) in revenue
in 2010. Among the increases, the VAT will be raised by one
percentage point to 25.5 percent, making it the highest VAT in
Europe. Parliament also expanded the personal income tax structure
to three tiers: annual income less than ISK 2.4 million ($18,700)
will be taxed at 24.1 percent; income of ISK 2.4 - 7.8 million
($18,700 - $60,800) will be taxed at 27 percent; and, income over
7.8 million ISK ($60,800) at 33 percent. The capital gains tax will
increase from 10 to 18 percent, and corporate taxes from 15 to 18
percent. Other taxes expected to affect consumers' wallets include:
an average 14 percent tax on sugary products and restaurant
activity; a 10 increase in automobile fees; and a 10 percent
increase in alcohol and tobacco fees.

4. (U) Parliament passed the 2010 budget on December 22 with 33
votes for the bill and 27 abstentions. No member of the opposition
voted in favor of the budgets passage. Kristjan Juliusson, an MP in
the Independence Party, criticized the coalition for having "given
up" on the budget and said the government should have identified
more cost saving measures. Press reports, however, quote Finance
Minister Steingrimur Sigfusson as saying that the budget results are
very acceptable given the limited possibilities. With the passage
of the 2010 budget, the government projects a ISK 98.9 billion ($770
million) deficit for 2010, a balanced budget for 2011 and a surplus
by 2013.

5. (U) Parliament intends to reconvene next week amid rumors that it
will vote on the Icesave bill before the New Year. These rumors
became more credible when the budget committee voted the Icesave
bill out of committee on December 22, effectively clearing the way
for a final vote. The Icesave bill has been stalled in parliament
for almost two months as the opposition, using filibustering
techniques, delayed discussion on the controversial topic.
According to media reports, the opposition would like even more
discussion of the topic; however, it appears as though the coalition
government does not want the issue to linger into the new year and
intends to put an end to it now.

6. (SBU) Comment: The passage of so many bills, of which a large
number are quite controversial, in such a quick and decisive manner
signifies a change in the tactics of the ruling coalition. Up until
now, the coalition has allowed the opposition to have its say, even
though it meant dragging out issues for months on end and delaying
the nation's economic recovery. It is unclear whether the coalition
has the votes to pass the Icesave agreement next week; however, the
coalition appears to want to resolve many of the thorniest issues
from 2009 and start with a fresh slate in the new year. End
comment.

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WATSON

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