The Competition Authority has submitted a report to the Parliamentary Committee on Economic Affairs and Commerce on Bill on a temporary reduction of the value-added tax on fuel from 24 per cent to 11 per cent for the period from 1 May to 31 August 2026.
The review points out that competition in the Icelandic fuel market is characterised by oligopoly and that previous analyses have shown indications of limited price competition. In such circumstances, it cannot be taken for granted that a reduction in public charges will automatically translate into lower prices for consumers.
The Competition Authority therefore considers it important that the government has clear measures to ensure that the reduction is passed on in full to the public. The Bill provides for the Competition Authority to have a specific role in monitoring price developments and reporting to the Minister for Competition if the reduction is not passed on to consumers. In such cases, the government can take temporary measures, such as a price cap or other controls on pricing.
The review states: „It must be assumed that the legislature's plans for direct government intervention in the pricing of a competitive market, as set out in the Bill, are motivated by a lack of confidence that market conditions and general competition rules are sufficient to protect the public interest in the short term. As noted above, that distrust may be well-founded.“
The Authority has no objections to the approach proposed in the Bill, given the market conditions and the objective of protecting consumers' interests in the short term. Furthermore, it is emphasised that in the long term, competition in the fuel market needs to be strengthened so that it will not be necessary to resort to similar interventions in the future.
The Competition Authority has already begun preparations for increased monitoring of the market and expects to receive the appropriate funding for this purpose.
Read the review by the Competition Authority here in its entirety.
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