Passenger Tax Causes Iceland’s Cruise Business to Decline

Cruise Iceland, which was set up to promote the country for cruise tourism, is warning that a government head tax imposed in 2025 is driving away the cruise lines. The group highlights that bookings for cruise ship port calls are down in 2026 and will further decline in 2027 unless the government reconsiders its position.

Iceland saw a strong growth in its tourism business based on its successful promotion campaign. The Icelandic Tourism Board reports a total of 2.3 million visitors to the country in 2024, but was projecting that the figure would largely plateau in 2025.

Specifically, cruise ship visits set a record in 2024 with 104 ships and 1,248 visits. Iceland is a popular destination for exploration cruise ships, and through the promotions, it was able to attract more large cruise ships, including some programs originating or ending the cruises in the capital of Reykjavik. However, Reykjavik received only approximately 20 percent of the cruise ship arrivals in 2024, with the vast majority going to smaller countryside ports including Akureyri, Ísafjörður, Seyðisfjörður, Grundarfjörður, Vestmannaeyjar, and Borgarfjörður Eystri.

For the 2025 season, the government imposed a head tax of approximately $20 for each passenger, irrespective of age. It applies regardless of whether the passenger was disembarking in Iceland and is for each day the cruise ship is in Icelandic waters. Cruise lines were passing the fees on to passengers, noting that they were acting as agents collecting the money for the government.

“Bookings for the coming years have already decreased significantly,” says Cruise Iceland, “so much so that one can speak of a collapse.” They noted a lack of interest at recent trade shows, asserting that the “shipping companies have begun to avoid Iceland.”

The group notes that cruise lines book their port calls two to four years in advance, saying that the full impact of the new tax will not be felt until 2027. Based on current bookings, however, it projects a 17 percent decline in total ship arrivals in 2026 and a 37 percent decline in 2027, compared to the record levels in 2024. On a gross tonnage basis, they project a 12 percent decline in 2026 and a 23 percent decline in 2027. They highlight that this demonstrates a decline in both large cruise ships and smaller expedition vessels. They cite as an example, Borgarfjörður Eystri, where calls will go from 28 ships to just one in 2027.

A 30 percent decline in ship calls, they project, will cost the government approximately $14 million in revenues. They note, however, that it will be particularly bad for smaller ports and municipalities around the country, which rely heavily on summer cruise tourism for revenues.

Under pressure, the government agreed in the spring to lower the 2026 head tax to approximately $16.50 (based on current exchange rates). The group, however, highlights that this remains significantly higher than the overnight tax on hotel stays in Iceland.

Cruise Iceland is presenting its data to the Parliamentary Committee on Economic Affairs and Trade. It is urging a reassessment of the policy.