New tax form miscalculated tax owed

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Norway’s tax authority Skatteetaten had to send apologetic emails to around 25,000 sole proprietors just before the weekend. A new tax form that was supposed to make the small business owners’ lives simpler ended up turning initially promised refunds into bigger tax bills.

It seemed too good to be true, and it was: Norway’s version of the US’ IRS informed one small business owner on Tuesday, for example, that her tax return had been completed and she’d be getting a refund of just over NOK 15,000 (USD 1,800). On Friday came a new message from the tax authorities: There’d been an error in calculating tax owed and there likely wouldn’t be any refund after all. Instead, in all likelihood, more tax would be owed, in addition to what had been prepaid in accordance with the law.

Simpler, but erroneous
The problem stemmed from the tax authority’s new Næringsrapport skatt, or Business Tax Return, that was introduced this year as a highly promoted method of filing taxes online, which is now also required of all business owners and those registered in Norway’s MVA (VAT) system. The filing method was indeed streamlined and won positive reviews from users, but it was flawed.

“There was an error in the transfer of information between the business- and personal tax systems,” Ole Ekhaugen of Skatteetaten told newspaper Aftenposten over the weekend. That mean that sole proprietors’ personal income from their business ventures was not included when taxes were calculated. That left them with tax bills far less than what they should have been.

In one case, not only was a small business owner’s formueskatt (fortune tax) unusually low, there was no demand for the 11.4 percent of personal income from a business venture that must be paid to cover Norway’s trygdeavgift, which is what pays for health care and other social welfare services.

Lacked pension credit
Even more worrisome: The so-called skatteoppgjør that serves as a taxpayer’s final and allegedly approved tax return in Norway gave no income credit for his or her future pension earnings, nor did it contain the important box called skatteattest, which serves as proof of income and taxes paid when, for example, a taxpayer applies for a loan.

The tax authorities thus issued their rare apology with a new promise that re-calculated and correct tax returns would be sent out within two to three weeks. None of the actual tax refunds initially promised had been paid out, either. Many of those using the new filing method will likely be getting tax bills instead.

The taxpayers themselves don’t need to do anything, other than ignore the initial correspondence and wait for the new account to arrive. Those still eligible for tax refunds are expected to receive them by late August, with interest. Berglund