Tourists and municipal finance

Presently, discussions are taking place in Iceland on the development and maintenance of tourist sites and various services needed in order for tourism to develop in line with the great increase in the number of foreign tourists. Municipalities are one of the interested parties and they are responsible for many services: sewage, maintenance of parks and streets, to name a few. There are doubts that municipal income increases according to the increase in tourists, because it is most likely this will take place through municipal income tax, but much of the work related to tourism is carried out by migrant workers. This research attempts to assess if municipal income changes with increased number of tourists. It will also be attempted to estimate if costs of municipalities increase with increased number of tourists, and also which types of costs. Available data on financial affairs of municipalities from the Association of municipalities, real estate prices from the National registry and statistics on number of tourists, from diverse sources, are used to assess changes in costs and incomes and if this will have the impacts described above. Quantitative methods are applied in the analysis. Regression analysis for panel data (fixed and random effect models) was applied along with descriptive analysis.