Iceland is a unitary State. It is a republic with a parliamentary government. The Icelandic Parliament, Althingi, is a unicameral parliament.
There are two levels of administration in Iceland: the national/central government and local authorities (municipalities). There is no regional level. There are six regional constituencies based on regional cooperation between local governments, but as they only have relevance for elections and statistical purposes, they are regarded as separate units of administration,.
Since 1 January 2013 there are 74 municipalities in Iceland[1]. The municipalities have diverse duties. They are expected to perform the tasks entrusted to them by law; in addition, they have a certain degree of flexibility in undertaking other tasks pertinent to residents.
Article 78 of the Icelandic Constitution of 1944 forms the basis of the legal status of local authorities and their relationship with the central government. It states that, "Local authorities shall govern their own affairs themselves as provided by law. The revenue sources of local authorities shall be determined by law, as shall their right to decide whether, and to what extent, to exploit them." The European Charter of Local Self-Government, signed by Iceland on 20 November 1985, confirms the autonomy of local authorities.
Alongside the Constitution, a key legal source concerning local authorities is the Local Government Act, no 138/2011, as amended. Section 1 of Article 1 of the Local Government Act provides that Iceland is divided into municipalities which govern their own affairs. The Local Government Elections Act no. 5/1998, as amended and the Local Government Finance Act no. 4/1995, as amended are two other main legislative texts. There is also legislation for specific sectors such as social welfare, education, planning, etc. The administration of local authorities is exercised under central government supervision.
Section 5 of Article 3 of the Local Government Act states that local authorities shall have their own sources of revenue, and shall be autonomous in determining fees collected by their own companies and agencies in order to meet their own expenses. Real estate taxes and local income taxes are the local authorities' own taxes. The Local Government Finance Act authorises municipalities to levy them.
The Act also provides for transfer payments to local authorities through the Municipalities ' Equalisation Fund. Local authorities are not allowed to introduce new types of taxes, as Article 77 of the Icelandic Constitution declares that the tax system shall be decided by law. By far the biggest part of Iceland local authorities' income (63%) is based on municipal income tax[2]. Various service fees account for 18% of the income, property taxes 11% and income from the Municipalities Equalisation Fund accounts for 8% of total revenues[3].
1.1. Central level
After the parliamentary elections of 2013, a coalition between The Progressive Party and The Independence Party was formed and a new government took office. Currently, the central government contains the following ministries:
Prime Minister's Office
Ministry of Education, Science and Culture
Ministry of Environment and Natural Resources
Ministry of Foreign Affairs
Ministry of Interior
Ministry of Industry and Innovation
Ministry of Welfare
The central government has national legislative powers in all areas. The Ministry of the Interior ensures that decisions of local authorities conform to the law and do not concern tasks which have been assigned to other bodies of law.
1.2. Regional level
There is no regional government. The following six constituencies have relevance for parliamentary elections and statistical purposes only:
1.3. Local level
Local municipalities form the second level subdivision of power in Iceland. Municipalities have responsibilities in the field of:
- Public utilities: water supply; waste water transportation and treatment; waste collection and treatment; electricity
- Street/road construction and maintenance;
- District heating;
- Social services;
- Services for persons with disabilities;
- Primary education;
- Culture, sports, youth and leisure;
- Sport facilities construction and maintenance;
- Town planning and building regulation: spatial planning, building inspection and building permits;
- Public parks and open areas;
- Monitoring of public and environmental health;
- Primary health services for the elderly;
- Economic promotion;
- Fire services;
- Transport;
- Harbours.
Municipalities have the possibility of taking on additional tasks that concern their inhabitants, provided that they have the budget to support these and that the tasks in question are not assigned to other government administrations by law.
[1] Iceland in figures 2016. Statistics Iceland. Page 33
[2] Association of Local Authorities in Iceland, Local governments in Iceland
[3] A collective work of Dexia Crédit Local Research Department, Sub-national governments in the European Union – Organisation, responsibilities and finance, Dexia Ed., La Défense, 2008.
