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Early Iceland and modern tax systems: rifts and settlements

22nd September 2016

Earlier this month we spent a week in Iceland. We were very lucky and saw the northern lights twice. The first time we watched for a couple of hours from the deck of our cottage in growing amazement as ribbons of light developed and spread across half the sky. They probably went on a lot longer, but we needed some sleep. Another highlight was a drive across volcanic desert on a gravel road where the skyline was dominated by a huge glacier. (This type of journey needs a 4x4.)

We also went to Thingvellir, which is interesting for several reasons. Iceland is situated on the Mid-Atlantic Ridge, where two tectonic plates (North American and Eurasian) are slowly moving apart. At Thingvellir one can walk along part of the rift between the two plates.

There is also another very significant aspect to Thingvellir. Iceland was settled from around 871. The settlers established farms across Iceland and were happy to leave behind the oppressive monarchies of Scandinavia. By 930, however, they felt that some sort of national assembly was needed. An assembly, known as the Althing, met at Thingvellir.

The Althing became an annual event at which Iceland's laws were made. Arguably it was the world's first parliament. Court hearings to resolve disputes took place at the same time.

There was no central government, however. Executive power was in the hands of local chieftains. In practice there was a lot of violence since it was down to individuals to enforce their rights by seeking recompense or revenge. During the 13th century the system broke down, private armies developed and in the end Iceland accepted rule from Norway. The detailed history of the Althing is beyond the scope of this note but the present-day Althing, now based in Reykjavik, is Iceland's national parliament.

Despite the differences in culture and time, there are connections between the story of the Althing and modern tax systems:

1.      It is impressive that Iceland coped for so long without a central government. In the end, however, the system broke down.

2.      Under a system without a central government people had to take enforcement of the law into their own hands. Law making and a court system were not enough: law enforcement is one of the jobs of a central government.

3.      A central government needs resources - taxes, in one form or another - in order to function.

4.      But tax laws, like other laws, must be clear and be operated fairly. From the time when the Althing was established there was a "law speaker", who recited the laws to the assembly. There was also a court system to resolve disputes. Long before Iceland accepted the need for a central government, it found these institutions to be necessary.

5.      In the modern world, in the absence of a law speaker, it is important that people should be able to access advice on the law. People also need to be able to access help in presenting their cases to courts and tribunals. Therefore specialist advisors have an important role when required.

6.      Much of this applies to laws generally, not just tax laws. But in the case of taxation there is an extra twist: usually the other party to any dispute is the government itself. And arguably, since the government has so many cards, it is particularly important that it should play fair.

Incidentally, if you are planning a trip to Iceland and want to know more about what we did, do let me know. We had a great time and would love to see more.


Robert Newey




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