Division of Powers
Iceland requested in March 2015 not to be regarded as a candidate country to the EU

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 regional committees based on regional cooperation between local governments, but they cannot be regarded as separate units of administration. At the beginning of the term 2010-2014, there were 76 municipalities in Iceland. 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 the 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 Local Authorities’ 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. Various service fees account for 18% of the income, property taxes 11% and income from the Municipality Equalisation Fund accounts for 8% of total revenues.

General division of powers​​​

Central level

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.

National legislative powers in all areas.

Local level 

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 if tasks 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.