Rates of decomposition in Arctic soils are regulated by temperature and moisture, but substrate availability is dictated by vegetation inputs, which are also subject to biotic influences. Here, we examine how leaf and litter inputs from individual dwarf shrub species influence soil enzyme activity in a sub-Arctic heath community in Abisko, Sweden. We further consider how foliar damage via insect herbivory (and outbreak) affects the soil community and decomposition. During the peak growing season (July 2011), we assessed how shrub community composition (Empetrum hermaphroditum, Vaccinium myrtillus, V. uliginosum and V. vitis-idaea) determined litter and soil phenol oxidase activity. A periodic severe outbreak of autumn moth larvae (Epirrita autumnata) affected this community in the following year (July 2012), and we used this to investigate its impact on relationships with phenol oxidase activity, soil respiration, soluble NH4 (+) and soluble phenolics; the soluble factors being directly associated with inputs from insect larval waste (frass). Pre-outbreak (2011), the strongest relationship observed was higher phenol oxidase activity with E. hermaphroditum cover. In the outbreak year (2012), phenol oxidase activity had the strongest relationship with damage to the deciduous species V. myrtillus, with greater herbivory lowering activity. For the other deciduous species, V. uliginosum, soil NH4 (+) and phenolics were negatively correlated with foliar larval damage. Phenol oxidase activity was not affected by herbivory of the evergreen species, but there was a strong positive relationship observed between E. hermaphroditum community abundance and soil respiration. We highlight the dominant role of E. hermaphroditum in such sub-Arctic shrub communities and show that even during insect outbreaks, it can dictate soil processes.