A propable reason also for our current inflation problem is that after last election we had to switch coalition partner and the social democrats that are with us, the Independence party (freedom of country and individuals), now has one philosophy, if there is a problem, lets throw money at it, and if it isn´t doing the trick, you ain´t spending enough.
But about our much better situation now than just few years ago here is an excerpt from this article:
http://www.ncpa.org/sub/dpd/index.php?Article_ID=14288
ICELAND: NORDIC TIGER
The rags-to-riches story of how Iceland’s 300,000 citizens became some of the world’s wealthiest people is a testament to capitalism’s animal spirits. Only after it opened up the economy, privatized state companies and slashed marginal taxes did this once famine-plagued island become a Nordic Tiger, says the Wall Street Journal.
Happily, the government can’t seem to get enough of a good thing. It convened a special task force in 2005 to look into ways of transforming Iceland into a financial hub. Headed by Sigurdur Einarsson, chairman of Kaupthing, the country’s biggest bank, the committee recommended in November that the corporate-tax rate be reduced to 10 percent from the current 18 percent.
In fact, the benefits of low taxes are already on full display in Iceland, which provides an almost perfect demonstration of the Laffer Curve, says the Journal:
* From 1991 to 2001, as the corporate-tax rate fell gradually to 18 percent from 45 percent, tax revenues tripled to 9.1 billion kronas (U.S. $135 million in today’s exchange rate) from just above 3 billion kronas (U.S. $44.5. million).
* Since 2001, revenues more than tripled again to an estimated 33 billion kronas (U.S. $490 million) last year.
* Personal income-tax rates were cut gradually as well, to a flat rate of 22.75 percent this year from 33 percent in 1995; meanwhile, the economy averaged annual growth rates of about 4 percent over the past decade.
But Iceland’s tax competition isn’t sleeping, says the Journal:
* In addition to Eastern Europe’s flat-tax movement, there is healthy rivalry from Switzerland, where individual cantons (territorial districts) can set their rates independently.
* Even Germany, once critical of tax-cutting, recently announced that it will cut its corporate-tax rate to just below 30 percent next year from the current rate of about 38 percent.
Source: Editorial, “Iceland’s Laffer Curve,” Wall Street Journal, March 8, 2007.
For text:
http://online.wsj.com/article/SB117330772978430098.html
For more on International Issues:
http://www.ncpa.org/sub/dpd/index.php?Article_Category=26
That makes sense to me. The extra revenues still don't satisfy their urge to spend, but why doesn't the media blame inflation on that? In Zimbabwe, inflation is a mystery to the media as it is in Iran, both countries with high unemployment and sagging economies. In Venezuela at least the media has an option of blaming inflation on oil revenues rather than Chavez's socialist policies.