Iceland - Politics, government, and taxation
Iceland is a constitutional republic that boasts the world's oldest parliament, the Althingi , which was established in 930 A.D. An independent country for over 300 years, Iceland was conquered by Norway in 1262. In the late 14th century, Iceland fell under the rule of Denmark when Norway and Denmark united under the Danish crown.
Abolished in 1800, the Althingi was reestablished in 1843 as a consultative assembly. The Act of Union, a 1918 agreement with Denmark, recognized Iceland as a fully sovereign state united with Denmark under the Danish crown. The British military briefly occupied Iceland in 1940 after Germany invaded Denmark, and then the United States became responsible for Iceland's defense in July 1942 under a U.S.-Icelandic defense agreement. In 1944, Iceland regained its independence and became a republic.
The Icelandic government consists of 3 branches. The executive branch is composed of the president who is chief of state, the prime minister who heads the government, and a cabinet of 9 ministers. The legislative branch consists of 63 members of the Althingi . Finally, the judicial branch has a supreme court and several district and special courts. There are 23 counties ( Syslur ) in Iceland, and there are currently 5 major active political parties: Independence (IP), Progressive (PP), Alliance (A), Left-Green Movement (LGM), and Liberal Party (LP). There is universal suffrage in Iceland and all women and men are eligible to vote once they turn 18 years old.
Iceland has a written constitution and a parliamentary form of government. The president, who is elected by direct popular vote for a 4-year term with no term limit, has limited powers and acts as a spokesperson and head of state. The prime minister and cabinet are responsible for policy-making. There are many women in the Icelandic government; 3 are heads of ministries, and 22 women have seats in the 63-member Althingi .
Members of the Althingi are elected to 4-year terms by popular vote, unless the Althingi is dissolved sooner. Anyone who is eligible to vote, with the exception of the president and the judges of the Icelandic Supreme Court, can run for election in parliament. Members are elected on the basis of proportional representation from 8 constituencies. After every election, the president gives one of the parliamentary leaders of the political parties the authority to form a cabinet, usually beginning with the leader of the largest party.
The present cabinet is a coalition government of the Independence Party (IP) and the Progressive Party (PP), which was formed in May 1999. The conservative Independence Party (IP) has dominated politics in Iceland since the 1990s. After the IP lost its majority in the Althingi with its former coalition partner, the liberal Social Democrat Party (SDP), the IP leader Prime Minister David Oddsson made an alliance with the more conservative Progressive Party (PP). The strategic move was a success and the IP regained its parliamentary majority with 40 Althingi seats. Since the 1990s, the SDP has not had much popular support because of its support of full EU membership for Iceland. The SDP are the only party to fully espouse the benefits of Iceland joining the EU, though in 2001 the PP and the Alliance party began to explore membership.
In 1996, Vigdis Finnbogadottir chose not to run for reelection as president of Iceland after serving 4 popular terms. She was the first woman elected president in the world. With a strong voter turnout, leftist party chairman Olafur Ragnar Grimsson became president by winning with a good margin against 3 other candidates.
In 2001, the center-right coalition government of the IP and PP continues to enjoy solid majority support and is expected to remain in office. However, harsh budgetary austerity measures introduced in the 2001 budget to control the rising economy could conceivably cause a decline in their popularity. The coalition partners remain in agreement on the importance of Iceland's current economic policy and have managed to avoid becoming embroiled in controversial issues, such as membership in the European Union. The largest opposition party, the left-of-center Alliance, has been preoccupied with reorganizing its infrastructure and is not a threat to the IP-PP coalition. The next round of parliamentary elections is scheduled for May 2003.
About 90 percent of the government revenue in 1998 came from income and wealth taxes, as well as indirect taxes such as those placed on corporations, payroll taxes, and value-added taxes on goods and services. The wealthy pay a high income tax , while the country's poorer citizens are exempt from taxation and receive a credit.