Norway's 2009 Draft Budget Announced

by Ulrika Lomas, Tax-News.com, Brussels

09 October 2008

The Norwegian government has announced a number of new tax measures for 2009 as part of its recent budget statement, although the overall level of taxation in Norway is to remain the same.

The major taxation measures in the draft budget, announced by Finance Minister Kristin Halvorsen on Tuesday, will affect those paying the wealth tax, inheritance tax, car owners and certain consumers. There are also some changes that will affect business, including new rules on depreciation and the loss of a tax break for certain insurance companies.

For individuals, the government has proposed the following tax changes:

• A broadening of the tax base of the net wealth tax, including increased tax values for commercial real estate.
• The abolition of the 80% rule that affects the very wealthy with low taxable income, combined with a considerable increase in tax-free allowances.
• Substantial increases in the allowances and exemptions applying to the inheritance tax.
• An increase in the tax values of privately owned companies.
• An extension of a scheme stimulating bank savings for young people who plan to buy their own home.

For companies and car owners, the government has proposed the following:

• Abolition of a special tax exemption for groups of mutual insurance companies.
• Separation of technical installations in buildings into a new asset group for tax depreciation purposes. This will increase the depreciation rate on these assets from either 2 or 4% up to 10%.
• Adjustments in the motor vehicle registration tax, further strengthening incentives to purchase cars with lower CO2-emissions by introducing a tax deduction for low emission cars and an excess tax for cars with emissions above 250 grams per km.

The draft budget also proposes an increase in the excise tax levied on non-alcoholic beverages, and increased tax on snuff tobacco.

Halvorsen's statement suggests that, for the moment, the main rates of taxation, including individuals and corporate income tax, will be left on hold for another year. Halvorsen said that in the past four years, the Norwegian economy has enjoyed its strongest period of growth since the 1950s. However, she suggested that recent developments in the global economy mean that this cyclical peak has now passed. Therefore, and in accordance with the government's own fiscal guidelines, she has projected a structural, non-oil budget deficit of NOK92 billion (USD15bn) in 2009.

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