Back in the day, before graffiti became "street art", I gave an exhibition of photographs of graffiti from around the world, entitled, "Is it (N)ever Art, Is it (N)ever Vandalism?" False or not, this dichotomy has been (and is) applied to graffiti since its modern-day beginnings.
As for the piece in question, did it cause any permanent damage, frequently the criterion for "vandalism"? If not, where's the harm apart from the feelings of a few territorial Icelanders?