What's Happening?
Cruise Iceland has raised concerns over a government-imposed head tax that is negatively impacting the country's cruise tourism industry. The tax, introduced in 2025, charges approximately $20 per passenger for each day a cruise ship is in Icelandic waters,
regardless of whether passengers disembark. This has led to a significant drop in bookings for cruise ship port calls, with projections indicating further declines in 2026 and 2027. Cruise lines are passing these fees onto passengers, acting as agents for the government. The tax has resulted in decreased interest from cruise companies, with a projected 17% decline in ship arrivals in 2026 and a 37% decline in 2027 compared to 2024 levels.
Why It's Important?
The decline in cruise tourism due to the passenger tax could have substantial economic repercussions for Iceland, particularly for smaller ports and municipalities that rely heavily on summer cruise tourism for revenue. A projected 30% decline in ship calls could cost the government approximately $14 million in revenues. The tax is significantly higher than the overnight tax on hotel stays, which may deter cruise lines from including Iceland in their itineraries. This situation highlights the delicate balance between taxation and tourism promotion, and the potential for policy decisions to impact international travel patterns.
What's Next?
Cruise Iceland is presenting its data to the Parliamentary Committee on Economic Affairs and Trade, urging a reassessment of the passenger tax policy. The government has agreed to lower the tax to approximately $16.50 for 2026, but this reduction may not be sufficient to reverse the decline in cruise tourism. The full impact of the tax will be felt in 2027, as cruise lines book their port calls years in advance. The situation calls for ongoing dialogue between the government and industry stakeholders to find a solution that supports both fiscal needs and tourism growth.
