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Thursday, May 19, 2022

Panel proposes new ‘finance tax’

A government panel charged with evaluating the global finance crisis, and means of warding off another one, has concluded that the finance sector is under-taxed in Norway. It proposes new taxes on investment banks, brokerages and other financial institutions, to make them pay for the state guarantees they enjoy.

The Norwegian government stepped in quickly in 2008, when markets crashed and financial institutions faced a severe credit crunch. The government provided liquidity, already guaranteed deposits and dramatically boosted public spending to ward off job losses.

Norway ended up riding out the finance crisis storm much better than most countries, but Finance Minister Sigbjørn Johnsen wants the government to be even more prepared in the future.

Jon M Hippe, the head of research foundation Fafo who led the panel, delivered its report to Johnsen on Tuesday. It recommends imposing a so-called “stability tax” based on a financial institution’s debt in relation to its capital and guaranteed deposits. Another tax proposal would be based on a financial institution’s profits and payroll, where salaries and bonus agreements are famous for being large.

“The branch is undertaxed,” Johnsen agreed, “and we will review these proposals thoroughly.” He called the panel’s recommendations “an important and central initiative.”

The finance and business sector predictably reacted negatively. Arne Hyttnes, director of the sector’s trade association FNO, said a uniquely Norwegian tax on the finance sector would have “unfortunate” consequences for both the business and its customers.

The panel’s proposal for new taxes on the Norwegian finance business will lead to “more expensive services for customers and weaken profitability for the industry,” Hyttnes claimed. Norwegian financial institutions could also lose market share, he claimed.

Views and News from Norway/Nina Berglund
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