Norway Discloses Tax Decisions In 2010 Budget

by Ulrika Lomas, Tax-News.com, Brussels

16 October 2009

The Norwegian government has announced new tax measures in its 2010 budget, aimed at improving the fairness of the tax system and encouraging the use of eco-friendly alternatives. The measures, which are expected to enter into force mid-2010, will, according to the government, not raise the overall level of taxation.

Tax measures in the budget are as follows:

• The tax-free allowance for the wealth tax will be increased from NOK470,000 (USD84,400) to NOK700,000, and to NOK1.4m for married couples. A new system to assess tax values on property will also be introduced;
• On the back of a recommendation by the Tax Evasion Committee, the government plans to encourage the use of cash as a means of payment of tax. According to the government, this will ensure that a larger share of the payment flows from businesses and the private market take place through banks and other financial institutions. In this way, transactions will be traceable and thus harder to conceal;
• A carbon tax will be introduced on the domestic use of gas or heating in buildings from April 1, 2010;
• The exemption from the diesel tax for the proportion of biodiesel is to be halved in 2010, with a view to phasing it out completely in 2011;
• The government plans to broaden the VAT base by introducing an 8% VAT rate on sporting and cultural services, with some exemptions for admission to theater performances. The aim is to expand the VAT base to include health clubs.

The government has decided to maintain its internationally high level of taxation, which currently accounts for around 39.8% of GDP. As it stands, the Norwegian tax system is characterized by high indirect taxes by international standards. VAT and excise duties represent about 28% of total tax revenue; personal income tax and the tax on net wealth levied on individuals represent about 37%; corporate tax, including employers’ social security contributions represent 19%; and taxes levied on petroleum activities represent about 13%.

In recent policy decisions the government has introduced measures to redistribute wealth towards welfare through more stringent taxes on dividends and gains on equity investments, a tax on net wealth, taxes on inheritance, and a higher minimum deduction. The government considers that this is an appropriate policy, and has said that although the tax level will not increase it will continue to reform the system to improve tax "fairness" whilst maintaining its attractiveness to investors and potential start-ups.

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