Reykjavík Grapevine - 09.03.2007, Blaðsíða 5

10_REYKJAVÍK_GRAPEVINE_ISSUE 03_007_CONSUMER/TAXES
Rejoice, it’s tax time once again. Many for-
eign residents in Iceland find the rules here
a bit baffling at first and, to be fair, Icelan-
dic tax forms have gotten more complicated
in the last few years. To reassure you that
things could always be worse, I offer up a
true story of taxpayer woe.
The story starts in 2002, the first full year
that I lived in Iceland. My only income that
year, from working as a tour guide in Europe
for an American travel agency, amounted
to a little under $37,000. When I moved to
Iceland, I had conscientiously made an ap-
pointment with RSK (the Icelandic tax au-
thorities), where a nice man (whom I will call
Elvar) explained how the Icelandic tax system
worked. He confirmed that I would need to
pay Icelandic tax on my non-Icelandic in-
come, but I could do so during the calendar
year after receiving it. So I set aside a good
chunk of my 2002 income for taxes, and I
filed my 2002 tax return in early 2003.
When I got my tax assessment from RSK
and my tax payment slip from Tollstjórinn in
August 2003, something looked wrong. I
had set aside a million ISK, but the first bill
from Tollstjórinn was for only 8.000 ISK. At
that point I did something which many peo-
ple say was my big mistake. I called Elvar and
told him that my tax assessment was wrong.
“You are totally crazy,” say friends. “The
government forgets to charge you a million
ISK and you call them up and tell them about
it?” But I wanted to establish my good name
in this country, and didn’t want to start off
by becoming a tax cheat.
Elvar and I figured out that I had report-
ed my American income on line 2.8 of the
tax form, in accordance with the instruction
booklet. In order to have it properly taxed
though, I should have put it on line 2.1, even
if there was nothing in the instructions to tell
me this. Elvar agreed with me that the in-
struction booklet was misleading. (Later, he
told me that that the person who edits the
instruction booklet disagreed with him, and
the booklet has never been corrected.)
As a result, my taxes needed to be reas-
sessed. No big problem, and there wouldn’t
be any penalties in my case, because it was
really RSK’s mistake. Elvar took all the details
he needed and explained how I would get
two letters, first a notice of reassessment and
then the final reassessment. Early December
2003, I received the final reassessment notice
from RSK. The letter gave the amount of the
reassessment (just short of a million ISK), but
didn’t give me any information about how to
pay it except to say that Tollstjórinn had been
notified of the reassessment.
My Troubles Begin
The regular assessment notice that one re-
ceives from RSK at the end of July each year
is followed by a bill from Tollstjórinn with
which one actually pays one’s taxes. So in
my naivety, I assumed that I would soon get
a bill from Tollstjórinn, listing the account
number where I should pay, the amount, and
the payment deadline.
Instead, several weeks later, a letter ar-
rived from Tollstjórinn telling me that my
payment was overdue. The letter demanded
not only my million ISK of tax, but more than
50.000 ISK in “costs” and penalty interest,
which was increasing every day.
I sent an e-mail to Elvar, who knew I’d
acted in good conscience. I hoped he would
step in and clear up the mess for me. He
wrote right back saying that Ríkisskatt-
stjórinn just assessed taxes, it didn’t collect
them. Sorry.
I went to the office of Tollstjórinn the next
morning and paid. But I had received an
overdue notice without anyone ever telling
me where to pay, how to pay, when to pay,
what kind of interest would be charged if I
didn’t pay, or even that my debt was due.
I was sure there had been some mistake. I
managed to meet to some higher-ups at Toll-
stjórinn, particularly a woman whom I’ll call
Harpa. I explained the story to her and told
her I thought it was wrong that I was being
charged interest on a bill when I had had no
notice that the bill was due. At first, Harpa
spoke sternly and spelled out the party line.
I should have come and paid on my own. No
exceptions could be made. She printed out a
report which showed that interest had been
accumulating on my account since Decem-
ber 20th.
Then, her expression and tone of voice
abruptly changed and she became confi-
dential. She told me that it was common
for people not to understand that their pay-
ments were due, especially for reassessed
taxes. But the rules didn’t allow her to send
bills, and she couldn’t change the rules. She
implied that she was kind of fed up with such
cases herself, but nothing would happen
unless the public complained. She said she
would appreciate it if I would appeal as far
as possible up the chain of command, espe-
cially because, in this case, the reassessment
had taken place because of RSK’s mistake.
The first step would be to send a formal ap-
peal to her, which, she explained, she would
deny. I could then appeal to the Ministry of
Finance.
I sent her the letter of appeal, which she
promptly denied. In the meantime, I called
up two people I know who are retired from
responsible positions in government finance.
Let’s call them Björn and Örn. Örn made some
inquiries on my behalf. “I talked to the head
guy at Tollstjórinn,” he said, “and he thought
what happened to you was totally ridiculous.
But he can’t do anything about it, because
it would set a dangerous precedent.” Björn
grilled me for a whole afternoon in his living
room before satisfying himself that I really
hadn’t tried to cheat on my taxes and writing
up a letter of support in Icelandic.
Appeal Process
Following Harpa’s advice, I sent a letter of
complaint to the Ministry of Finance, attach-
ing a copy of Björn’s letter. In short order I
received a letter back telling me that paper
bills were never sent in cases of reassessed
taxes and that the government did not have
the legal authority to refund my overdue
penalties.
Now I decided to complain to the office
of the parliamentary ombudsman. The om-
budsman’s primary purpose is to determine
whether government agencies have acted
according to the law. His response, though
flawed in several respects, pointed out some-
thing important: It is written into Icelandic
law (para. 6, Art. 112, Act no. 90/2003) that
reassessed taxes must be paid within ten
days from the date of the reassessment. And
indeed, looking back at the printout I had
gotten from Tollstjórinn, I had been charged
interest starting exactly ten days from the
date of the reassessment. But absent from
this law is any kind of requirement that tax-
payers undergoing reassessment be told
anything about this ten-day deadline, or told
where to send their payment.
Now at least I knew. I had been treated
– or rather mistreated – exactly in accor-
dance with the law. I felt this law needed to
be changed. And who changes laws? Parlia-
ment. They are always tweaking small details
like this. Iceland is a small country. Plenty of
people seemed to agree with me. Maybe I
could push to get it changed.
I soon learned the name of the chair-
man of the parliamentary committee that
oversees tax law. He represents the Indepen-
dence Party and is reported to be passion-
ately interested in tax issues. I wrote him an
e-mail, and spoke to his secretary by phone,
outlining the issue briefly and politely. When
I got no response, I wrote another e-mail,
and still got no response. Some months later,
I had a chance to talk to him at a conference,
and mentioned the issue, again briefly and
politely. He said that he sympathised very
much, and had once had a similar problem
himself, and that I should definitely get in
touch – after the primary election. After the
primary election, I sent him another brief and
polite e-mail. I haven’t heard back. In fair-
ness, I understand that members of parlia-
ment get a lot of e-mail, and maybe I should
just try harder.
Icelandic Deficiencies
By law, Canadian taxpayers may receive a
refund of overdue penalties from Revenue
Canada if they have not received proper no-
tice of taxes due (source: GST Memorandum
500-3-2-1). And in the United States, the Fair
Credit Reporting Act requires private-sector
creditors to disclose payment terms fully and
prominently. Should the same common-sense
principles not apply to the public sector in Ice-
land? Of course I think they should, and so
clearly did Harpa, and Örn, and Björn, and
others as well. So why was it so hard to get
people interested in changing the rules?
Perhaps they just had more important
things to do. Or perhaps there is a lingering
sense in Iceland (maybe dating back to the
trade monopoly days?) that customers are al-
ways wrong, and customers who owe money
are even more wrong – so there’s no reason
to care about their “user experience.” Or per-
haps it’s just hard to fight government offi-
cials.
I’ve since learned that many other issues
surrounding notice of payments due are
controversial in Iceland. I have a small file of
newspaper clippings on questions such as
whether Icelandic merchants may charge for
billing their customers, and whether overdue
charges should be regulated by law. More
broadly, I’ve learned that Iceland missed out
on enacting a lot of the consumer protection
legislation that came into being in America
and Europe during the 1970s (there are no
class-action lawsuits or small-claims courts in
Iceland). What is interesting in Iceland is that
government is just as big an offender as the
private sector.
Change is long overdue. In the meantime:
Readers beware. You too could be assessed
a debt by the Icelandic government without
being given any information about where to
pay, how to pay, when to pay, or what kind
of interest will accrue if you don’t pay. And
you won’t get any meaningful sympathy, even
if the whole thing was the tax department’s
mistake to begin with. Hah.
For information on how to fill out your tax
forms, turn to the Internal Revenue Director-
ate (www.rsk.is), where further information is
available in the following languages: English,
Danish, Finnish, Norwegian, Swedish, French,
Spanish, German, Polish, Russian and Chinese.
The Directorate of Customs collects taxes for
the Icelandic Government, and the City of
Reykjavík. For more info, visit www.tollur.is.
* Photos by Ashkan Sahihi in relation to his exhibition of
100 million ISK at Akureyri Art Gallery in January 2005.
Cash provided by Kaupþing Bank.
Honesty Doesn’t Pay
Text by Ian Watson Photos by Ashkan Sahihi*
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