The collection of taxes and duties is fundamental to the government's ability to provide social services. Taxes and duties are the building blocks of the welfare state. The largest expenses of the National Treasury are the Health Care System, Social Security and Welfare along with the Educational System.

The levying of taxes and their collection are two distinct procedures in Iceland. On the one hand, taxes are levied by the Internal Revenue, its departments and various other institutions. On the other, the Directorate of Customs has the task of collecting taxes and duties. The Directorate collects the majority of all taxes and duties in Iceland.