Policy responses for Iceland - HSRM

Iceland


Policy responses for Iceland

6. Measures in other sectors

6.1 Measures in other sectors

Many MEASURES IN OTHER SECTORS beyond the immediate scope of the health system are being taken to prevent further spread of the virus. This section contains information on many of these areas, including border and travel restrictions and economic and fiscal measures, among others.

On April 21st 2020 the government of Iceland announced the second phase of economic response package to the COVID-19 crisis.
Worth up to 420m USD, this second phase of the economic response focuses on support and protections for small enterprises, innovation and vulnerable groups, and it includes the following actions:
• Prioritisation of innovation with increased investments and higher reimbursement for research and development
• Closure subsidies to compensate companies forced to halt their operations for public health reasons
• Immediate support loans for small and medium-sized enterprises (SME)
• Companies to be allowed to carry 2020 losses back to offset 2019 income tax
• Jobseekers and vulnerable groups to receive dedicated support
• Focus on mental health with remote medical services being strengthened and new campaign against domestic violence
• Multi-faceted support for children – special recreational subsidy for low-income families
• Wage differentials paid to healthcare workers due to COVID-19
• Funds set up to support summer school terms and creation of over 3,000 summer jobs for students in Iceland
• Summer term for students – work, study, and entrepreneurial projects
• Strengthening of food production through innovation and marketing
The government bill associated with this package is to be discussed in Parliament.

On April 22nd 2020 the Minister of Health decided on the advice from the Medical Director of Health that from May 4th elective surgery and other medical treatments postponed from March 23rd will be reopened .


On April 22nd Iceland has introduced temporary Schengen border controls and 14-day quarantine for international arrivals to take effect April 24th.

From Friday, April 24th, individuals arriving from international flights to Iceland must be quarantined for 14 days; temporary internal Schengen border controls will be introduced on the same day. Barring any changes in the medical and scientific advice, these rules will remain in place until at least May 15th.
The Chief Epidemiologist’s latest update stated that the COVID-19 outbreak in Iceland has now been largely contained and only a few new cases are diagnosed each day. One of the most important factors in controlling the outbreak and preventing a widespread epidemic in Iceland will be to avoid importation of cases from other countries.
In order to control importation of new cases, a project group headed by the National Commissioner of Police was established at the request of the Chief Epidemiologist. This group was in charge of assessing various options of COVID-19 policies also taking into account policies and plans considered in neighbouring countries. Following the submission of the group´s recommendations this decision has been taken. So far, tourists have been exempt from this rule as they do not come into contact with vulnerable groups, however this will now change.
In order to enforce the amended quarantine rules, temporary border controls for arrivals from the Schengen area have been established in accordance with the Immigration Act and the regulation on cross-border travel.
Those passengers arriving in Iceland will be required to fill out a Public Health Passenger Locator form and present it at the border inspection point, providing necessary information regarding where they will stay in quarantine and how it will be organised .


Government of Iceland has announced increased support for companies and extension of part-time unemployment benefits .

Icelandic companies that have suffered substantial revenue losses due to the COVID-19 crisis will be given the opportunity to apply for government support to pay a portion of salary costs during the employee notice period, protecting workers’ rights and preventing a wave of corporate insolvencies. Support which allows workers to go part-time and receive top up payments from the government will be extended until the autumn, with amendments, and simpler rules on financial restructuring of businesses will be adopted enabling firms to seek protection easily.
The Government has approved three proposals in support of employees and companies. The aim of the proposals is to mitigate the damage caused by mass lay-offs and mass insolvencies, thereby protecting workers’ rights while fostering greater resilience in the economy as a whole.
1. The option for full time workers to move to part-time with government support will be extended to 31 August, from its original finish date on 1 June. The livelihoods of tens of thousands of employees have been protected since this support measure took effect, but the economic outlook has changed markedly in a month or so. The part-time option allows employees to reduce their hours or salary to as low as 25%, or 50% from July onwards, and top up their earnings with support from the Government. An application must be filed for an extension, and the requirements for participation will be reviewed.
2. Simpler rules on financial restructuring of companies will be temporarily put in place. The new rules will incorporate the basic elements of the current rules, with amendments aimed to simplify the process of seeking protection for companies while an assessment is made of their position, and until the outlook for the future is clarified. The amendments cover factors such as the requirements for financial restructuring, requests for restructuring and consideration of applications, deadlines, authorisations for measures, counterparties’ authorisations for cancellation, and non-performance clauses.
3. In order to protect workers’ rights and avoid insolvencies, companies will be given the opportunity to apply for government support to pay a portion of salary costs for any staff member during their notice period. This support will take the form of payment up to ISK 633,000 per month for up to three months, plus vacation pay. It is limited to those companies that have suffered at least a 75% loss in revenue and are forecasting continued revenue losses at least through 2020. An estimated quarter of Icelandic companies are anticipated to be eligible for this support. Government support will be capped at a ratio of 85%. These employees will have priority access to jobs when business activities resume, and will retain certain specified accrued rights from that employer. Further measures will be put in place to assess or protect operational viability, participation in this measure, and right of recourse for the employees. This government support will be available from 1 May through 30 September.
Legislative bills on the proposals are being drafted by the Ministry of Social Affairs, Ministry of Finance and Economic Affairs, and Ministry of Justice, and relevant stakeholders will be consulted concerning the final structure of the programmes.

Travel restrictions
On May 12th, the government of Iceland announced that it expects to start easing restrictions on international arrivals no later than 15 June 2020, while from 15 May some professionals arriving in Iceland including scientists, filmmakers and athletes will be eligible for a modified quarantine. The exact details of the revisions will be decided by the Government’s multisector working group, however it is expected travellers may choose between a undergoing COVID-19 diagnostic test or a two-week quarantine . 

New regulations regarding the current restrictions on the border are forthcoming, as the current regulation announced on August 14 will expire on September 15.

see section 1.3: transition measures for updates on travelling and border regulations

Economic measures

A package of fiscal measures of ISK 230 billion krona (7.8 percent of GDP) has been submitted to parliament to ease the strain on households and firms and, looking forward, to help the economy recover. Key measures to support households and firms include tax cuts, tax deferrals, increased unemployment benefits, one-off child allowances, support to companies whose employees have been quarantined, and state-guaranteed bridge loans to companies. Key measures to restart the economy (1.1 percent of GDP) include public investment, tax incentives for real estate improvement, temporary tax relief for the tourism sector, and marketing efforts to encourage domestic tourism.
More specifically, (first) the Government of Iceland is taking unprecedented measures in response to COVID-19 in order to secure wages of quarantined individuals, which is key to supporting people to make responsible decisions to reduce the spread of the virus.
Second, to protect jobs and employment relationships between Icelandic workers and their employers during these extraordinary times, the Government of Iceland has committed to allowing part-time workers to claim up to 75 per cent of unemployment benefits, to avoid job losses.
Third, companies will be allowed to postpone the payment of taxes until 2021 to improve liquidity in business operations. Hotel taxes will be abolished until the end of 2021. Reductions in bank taxes and state guarantees on loans to eligible companies are designed to increase the opportunities for lending, allowing companies to continue business and protect salary payments.
Fourth, during the next 15 months, individuals can withdraw a monthly sum from their voluntary pension savings, to a maximum of ISK 800,000. VAT reimbursement for construction and maintenance work will increase from 60% to 100%. In addition, the VAT reimbursement provision will be extended to the third sector organisations including charities and sports associations.
Fifth, a one-off child benefit payment will be made on June 1, 2020 to all families with children under the age of 18. Parents with an average monthly income below ISK 927,000 in 2019 will receive ISK 40,000 per child and those with higher income will receive ISK 20,000 per child.
Finally, this year, the Government of Iceland, along with local municipalities, will initiate a special project, aimed at increasing investment, ISK 20bn investment initiative, in transport, public construction and technology infrastructure. Government contributions to research and science will also be increased. Details of this project will be announced at a later date.
On March 31st the parliament, approved and passed the government bill presented to the parliament in response to the economic impact of the COVID-19 pandemic.
These broad-based measures complement the Central Bank’s decisions to lower interest rates, minimum reserve requirements, and countercyclical capital buffers.
The Central Bank of Iceland (CBI) has provided monetary support and has taken measures to preserve financial stability. Since the outbreak, the Monetary Policy Committee (MPC) has cut policy rates (interest rate that has the strongest effect on short-term market rates) by 100 basis points to 1.75 percent and reduced deposit institutions’ average reserve requirements point to 1 from 2 percent to ease their liquidity positions by about 1 percent of GDP. The CBI Financial Stability Committee reduced the countercyclical capital buffer from 2 percent to 0 percent, providing scope for banks to increase lending by ISK 350 billion (12 percent of GDP).

Sources:
The Government of Iceland, Ministry for Foreign Affairs and Ministry of Justice,    https://www.government.is/news/article/?newsid=6171aeaf-6ac9-11ea-9456-005056bc530c
The Directorate of Immigration March 23rd 2020. Travel restrictions to Iceland and 14-day quarantine for all residents. https://www.utl.is/index.php/en/about-directorate-of-immigration/news/1085-travel-restrictions-to-iceland-and-14-day-quarantine-for-all-residents  
The Government of Iceland March 14th 2020. Icelanders advised not to travel abroad. https://www.government.is/news/article/?newsid=93a4347b-6605-11ea-945f-005056bc4d74
Directorate of Health April 1st 2020, Instructions for ports and vessels. https://www.landlaeknir.is/utgefid-efni/skjal/item39946/
IMF April 2020, Key Policy Responses as of April 8th 2020: Fiscal https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19#I
Althingi 2020 (Icelandic Parliament). Act no. 25/2020 on amendments on variouse acts in order to meet the economic impact of the pandemic causedby the coronavirus, https://www.althingi.is/altext/150/s/1206.html
Government of Iceland, Icelandic Government annouces 1,6bn USD response package to the COVID-19 crisis, March 21st 2020  https://www.government.is/news/article/2020/03/21/Icelandic-Government-announces-1.6bn-USD-response-package-to-the-COVID-19-crisis/
IMF April 2020, Key Policy Responses as of April 8th 2020: Monetary and Macro-Financial, https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19#I

Travel restrictions
There are no particular border restrictions in Iceland, such as a mandated quarantine for those tourists entering the country, or area lock downs. However, the Government implemented travel restrictions prohibiting unnecessary travel to the Schengen Area and the European Union on March 20th.Icelanders were advised not to travel abroad and those who were abroad were advised to consider an early return. There are no restrictions on transport of good to or from the country. On April the 1st instructions were given to all ports and vessels, all port employees and first responders of all ports regarding quarantine and precautions against infection.

Economic measures
A package of fiscal measures of ISK 230 billion krona (7.8 percent of GDP) has been submitted to parliament to ease the strain on households and firms and, looking forward, to help the economy recover. Key measures to support households and firms include tax cuts, tax deferrals, increased unemployment benefits, one-off child allowances, support to companies whose employees have been quarantined, and state-guaranteed bridge loans to companies. Key measures to restart the economy (1.1 percent of GDP) include public investment, tax incentives for real estate improvement, temporary tax relief for the tourism sector, and marketing efforts to encourage domestic tourism.
More specifically, (first) the Government of Iceland is taking unprecedented measures in response to COVID-19 in order to secure wages of quarantined individuals, which is key to supporting people to make responsible decisions to reduce the spread of the virus.
Second, to protect jobs and employment relationships between Icelandic workers and their employers during these extraordinary times, the Government of Iceland has committed to allowing part-time workers to claim up to 75 per cent of unemployment benefits, to avoid job losses.
Third, companies will be allowed to postpone the payment of taxes until 2021 to improve liquidity in business operations. Hotel taxes will be abolished until the end of 2021. Reductions in bank taxes and state guarantees on loans to eligible companies are designed to increase the opportunities for lending, allowing companies to continue business and protect salary payments.
Fourth, during the next 15 months, individuals can withdraw a monthly sum from their voluntary pension savings, to a maximum of ISK 800,000. VAT reimbursement for construction and maintenance work will increase from 60% to 100%. In addition, the VAT reimbursement provision will be extended to the third sector organisations including charities and sports associations.
Fifth, a one-off child benefit payment will be made on June 1, 2020 to all families with children under the age of 18. Parents with an average monthly income below ISK 927,000 in 2019 will receive ISK 40,000 per child and those with higher income will receive ISK 20,000 per child.
Finally, this year, the Government of Iceland, along with local municipalities, will initiate a special project, aimed at increasing investment, ISK 20bn investment initiative, in transport, public construction and technology infrastructure. Government contributions to research and science will also be increased. Details of this project will be announced at a later date.
On March 31st the parliament, approved and passed the government bill presented to the parliament in response to the economic impact of the COVID-19 pandemic.
These broad-based measures complement the Central Bank’s decisions to lower interest rates, minimum reserve requirements, and countercyclical capital buffers.
The Central Bank of Iceland (CBI) has provided monetary support and has taken measures to preserve financial stability. Since the outbreak, the Monetary Policy Committee (MPC) has cut policy rates (interest rate that has the strongest effect on short-term market rates) by 100 basis points to 1.75 percent and reduced deposit institutions’ average reserve requirements point to 1 from 2 percent to ease their liquidity positions by about 1 percent of GDP. The CBI Financial Stability Committee reduced the countercyclical capital buffer from 2 percent to 0 percent, providing scope for banks to increase lending by ISK 350 billion (12 percent of GDP).

Sources:
The Government of Iceland, Ministry for Foreign Affairs and Ministry of Justice,    https://www.government.is/news/article/?newsid=6171aeaf-6ac9-11ea-9456-005056bc530c
The Directorate of Immigration March 23rd 2020. Travel restrictions to Iceland and 14-day quarantine for all residents. https://www.utl.is/index.php/en/about-directorate-of-immigration/news/1085-travel-restrictions-to-iceland-and-14-day-quarantine-for-all-residents  
The Government of Iceland March 14th 2020. Icelanders advised not to travel abroad. https://www.government.is/news/article/?newsid=93a4347b-6605-11ea-945f-005056bc4d74
Directorate of Health April 1st 2020, Instructions for ports and vessels. https://www.landlaeknir.is/utgefid-efni/skjal/item39946/
IMF April 2020, Key Policy Responses as of April 8th 2020: Fiscal https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19#I
Althingi 2020 (Icelandic Parliament). Act no. 25/2020 on amendments on variouse acts in order to meet the economic impact of the pandemic causedby the coronavirus, https://www.althingi.is/altext/150/s/1206.html
Government of Iceland, Icelandic Government annouces 1,6bn USD response package to the COVID-19 crisis, March 21st 2020  https://www.government.is/news/article/2020/03/21/Icelandic-Government-announces-1.6bn-USD-response-package-to-the-COVID-19-crisis/
IMF April 2020, Key Policy Responses as of April 8th 2020: Monetary and Macro-Financial, https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19#I