The highly competitive fiscal system in Iceland is both simple and effective, and has been recognized as such by a number of international companies that have decided to relocate their business to Iceland in the past few years. The main attraction has of course been the low 18% flat tax rate levied on corporate net gain. But Iceland has become even more competitive.

Yesterday, the Icelandic government declared that it would lower the corporate tax rate to 15%. The change applies to the fiscal year 2008 and comes into effect on tax returns filed in 2009. The tax reduction is a clear sign that the government wants to continue on this path of making the Icelandic business environment among the most competitive in the world by focusing on a simple and effective overall tax system with low corporate tax, instead of creating complicated incentives.