The fiscal policy challenges in Iceland are rapidly evolving. The crisis related issues - in
particular, the imperative to bridge the fiscal financing gap - have now subsided. The fiscal position
has moved decisively into balance and the public debt ratio is now firmly on a downward trajectory.
36. However, deep structural fiscal issues, which often pre-date the crisis, are now
returning into focus. The VAT system is comparatively inefficient in terms of raising revenues,
despite very high tax rates. The personal income tax is complicated, and in some key respects, lacks
The fiscal policy challenges in Iceland are rapidly evolving. The crisis related issues - in
particular, the imperative to bridge the fiscal financing gap - have now subsided. The fiscal position
has moved decisively into balance and the public debt ratio is now firmly on a downward trajectory.
36. However, deep structural fiscal issues, which often pre-date the crisis, are now
returning into focus. The VAT system is comparatively inefficient in terms of raising revenues,
despite very high tax rates. The personal income tax is complicated, and in some key respects, lacks
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