Iceland Mag

12 Reykjavik

Iceland Mag

Ask the Expert

Why is alcohol so expensive in Iceland? And what can you do to protect yourself against it?

By Staff

  • 75 or 80 proof, and over 80% taxes Only a tiny fraction of the price of alcohol goes to the producer or importer. The vast majority is taxes. Photo/Iceland mag

One of the things that shocks foreign visitors to Iceland is the price of alcohol: It is expensive to drink in Iceland!

Two examples of the sky high prices, picked at random in December 2016: A bottle of vodka (1 liter/33.8 fl. oz Finlandia) at the state monopoly liquor stores, ÁTVR or Vínbúðin, was 7,300 ISK, which 65.7 USD or 62 EUR. A similar bottle costs somewhere between 20 USD and 40 EUR in the US and Europe. A half liter (just short of a pint) of standard lager, Viking or Gull, at a bar in downtown Reykjavík will set you back ca 1,200 ISK (10,8 USD/10,2 EUR). 

With prices like that it is somewhat of a mystery how Icelanders can afford to drink at all! Especially when we keep in mind that here in Iceland life's other necessities are not cheap either. 

kaldi_bjorglas_-_george_leite.jpg
Quality vs Price Not all happy-hours are made equal. One bar has only the generic lagers on happy hour, another top quality craft beers. Photo/George Leite

Simple answer: Taxes!
There is a simple explanation for the high prices: Taxes. It costs a small penny to maintain a prosperous welfare state at the edge of the habitable world, complete with an Opera, a symphony orchestra and all the cultural institutions of modern civilized societies to serve a tiny population of 330,000 people! One of the things which is taxed most heavily in Iceland is alcohol. 

Alcohol taxes are levied by alcohol volume. If we take the bottle of vodka as an example: The Alcohol Tax makes up 5,419 ISK to the price of 7,300. The value added tax adds another 724 ISK. In addition the state levies a 20 ISK recycling fee.

The state therefore collects a total of 6,163 ISK in taxes on the bottle, or 84.4% of the sale price. In addition the state monopoly stores add their margin, 705 ISK.

All in all the state consumes 6,868 ISK out of the retail price: a whopping 94.1%.

How to protect yourself from high prices?
For travellers who are not willing to give up on partying while in Iceland and save money on their trip by skipping alcohol entirely during the visit, the two alternatives are either to stock up on alcoholic drinks at the arrival Duty Free Store at Keflavík Airport or to make use of the great happy-hour specials at local bars. 

Another thing to keep in mind: The fact that the alcohol tax is levied by alcohol volume, and that it is a far larger share of the price of alcohol than the value added tax, means that the price differential between expensive high quality beer or wine and the less expensive, lower quality brands is not as large, proportionately, as they might be. A top notch craft beer will therefore not be all that more expensive than the generic mass produced lager. Spending a few extra króna might be worth it!

Read more: Beware: The “Pilsner” at grocery stores is not beer!

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