The Icelandic Government has decided to remove VAT on electric cars to bring EV costs in line with ICE prices.
We don’t believe that Governments should be promoting EVs and Hybrids by giving tax breaks to buyers. In a country like the UK – and most other countries – promoting EV cars at the taxpayers expense is a nonsense. But there are exceptions.
Imagine your country is quite small and two thirds of the population live and travel within a relatively compact urban area. Now imagine your natural resources mean you can produce all the electricity you need from hydro power or geothermal power.
That is exactly the position in Iceland, where around two thirds of the population live and travel with the Greater Reykjavik area and all their electricity comes from geothermal and hydro. Which means there is little range anxiety for EV buyers and no problem with electricity generation.
So the Icelandic Government can sensibly – and with a strong economic argument – give incentives to car buyers to go the EV route. They already have zero import duty on EVs and now they’ve removed VAT from EVs (well, almost all – there is an upper price limit) which will bring electric cars in to line with ICE cars in terms of price.
Which is all very sensible – but only for a country like Iceland; the exception that proves the rule.