Oslo’s city government leaders from the Labour Party will now need to defend their new controversial property tax in court. They were sued over the questionable legality of the new tax, and officials of the Oslo City Court decided Monday that the case deserves to go to trial.
The court’s decision is a preliminary victory for Norway’s national organization representing homeowners (Huseiernes Landsforbund). It claims the tax is illegal because it’s only assessed on those with property valued at more than NOK 4 million (USD 470,000). Labour Party officials didn’t hide the fact that they only wanted to tax those with the most expensive homes, while opponents argue that tax burdens are supposed to be spread among the population in general.
“With its overall deductible of NOK 4 million (off the assessed market value of the property), the tax hits only a certain and specific group of homeowners,” Bettina Banoun, a tax expert and lawyer who’s representing the homeowners’ organization, told Norwegian Broadcasting (NRK). “This should be a tax on everyone, but with such a high deductible, it only affects a specific portion of the city’s population, and in an unfair manner.”
Banoun and the homeowners’ organization thus call the tax “discriminatory,” and hope the court will agree. “We believe the property tax that’s been approved in Oslo is illegal, and that’s what we intend to prove in court,” Banoun said.
If the deductible amount is reduced, far more homeowners will be affected by Oslo’s property tax. “If it’s proven that the (current) rules are discriminatory, it will be up to the city government to decide whether to impose a property tax witih a lower deductible that will hit more homeowners,” Banoun told NRK. “But that will be a political question.” Even though that would spread the tax burden more evenly, it may be politically unpopular to assess a general property tax, even for Labour, which always wants those with the most resources to pay the most tax.
The new property tax, which the Labour Party campaigned for as a means of raising additional city funds for elder care and day care for children, began being assessed just six months after Labour won city government power in Oslo along with the Greens Party and the Socialist Left. Labour’s top city politian, Raymond Johansen, promised it would only amount to “a few hundred kroner” a year because of its “low” tax rate of .2 percent of the tax authorities’ determination of the market value of homes, minus NOK 4 million.
This year, though, the Labour-led city government has raised the tax rate by 50 percent, to .3 percent, while the assessed market values of property have been raised by as much as 14 percent or more. That has left nearly all homeowners subjected to the tax with bills that have doubled or even tripled this year.
Some also complain that property tax in Norway, which is the subject of taxpayer revolts in several towns and cities around the country, amounts to double taxation. That’s because Norway’s state income tax system includes a so-called “fortune tax” (formueskatt) that year after year assesses tax on individual net worth. Property values contribute to that net worth, along with the values of cars, boats, other possessions and bank balances after subtracting debt. Homeowners end up paying fortune tax on the value of their home plus property tax on the value of the same asset.
Robert Steen of Labour Party, who serves as finance director for the city goverment, insists the new property tax is legal, as does Irene Tanke, the project leader who’s been responsible for imposing it. “If there’s to be another decision on this, then it must be up to the courts to make it,” Tanke told NRK.
The city has received around 6,700 formal complaints about the tax but has only managed to respond to less than 50 of them. “We know that there are many opinions on this, so we have spent a lot of time making sure we are handling the complaints correctly and providing a good legal evaluation of the complaints,” she said. “That’s why we haven’t handled as many as we would like.” She said each individual homeowner filing a complaint has a right to a response, even as the lawsuit looms over the tax itself.
City officials, meanwhile, expect to raise NOK 1.3 billion in property tax revenue this year, three times the amount budgeted. That’s led to Steen being called “Uncle Scrooge” although he fends off complaints by insisting that Labour is only doing what it promised. “We said we would build day care centers for 3,000 more children and improve elder care so that more elderly can remain at home longer,” Steen told NRK last month. The property tax revenues, he claimed, allow Labour to now deliver on those promises. Many elderly on fixed incomes themselves will be indirectly paying dearly for any improved care they receive, however, since they often live in paid-off homes that have skyrocketed in value, leaving them subject to hefty new property tax bills.