The new budget’s household effects

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The new state budget presented by Finance Minister Sigbjørn Johnsen on Monday may seem like pretty dry stuff, but it affects nearly every aspect of life in Norway. Higher prices for food and soft drinks, a higher mandatory fee to state broadcaster NRK and higher tax consequences of owning a second home are just some of the ways average residents will feel its effects.

Finance Minister Sigbjørn Johnsen and opposition politicians sparked laughter in the parliament on Monday when they mixed up their respective podiums, leading one opponent to joke that “we’re just getting ready for next year,” when he might hold a ministerial post instead of Johnsen after national elections. PHOTO: Finansdepartementet

Johnsen from the Labour Party and his fellow left-center government coalition members claimed they’re “investing in welfare and jobs,” with their budget proposal for 2013 “well-suited” to an economic situation that’s good at home in Norway but turbulent in many other parts of the world. He confirmed that the government will refrain from spending all the oil revenues that they could, and therefore keep Norway’s domestic economy from overheating in a time of still-high oil prices and low interest rates.

By continuing to rely mostly on its own tax base and using “only” NOK 125 billion of its oil revenues, the government will keep spending “neutral” and tap just 3.3 percent of total capital in Norway’s huge sovereign wealth fund known as the “Oil Fund,” where the vast majority of Norway’s oil wealth is saved for future generations. Johnsen could have tapped another NOK 26 billion and still stayed within the 4 percent guideline that’s equal to what the fund is expected to earn over the long term.

Norwegians, meanwhile, will be contributing more to state coffers. No major tax hikes were announced, but a wide variety of fees will rise anywhere from 1- to nearly 4 percent. Norwegians will now need to pay NOK 2,680.50, for example, for the annual broadcast license collected by NRK to keep the state-owned radio-, TV and online media outlet relatively free from advertising. That’s up 3.9 percent from last year.

The government is moving ahead with its widely unpopular proposal to raise import tariffs on meat and hard cheeses by re-calculating how they’re set. Imported beef prices would rise by 344 percent and cheese by 277 percent, effectively keeping them out of the market and protecting Norwegian beef and cheese, which will then leave Norwegian farmers more free to boost their own prices. Critics charge this will reduce selection at grocery stores and further add to grocery bills that already are the highest in the world.

Taxes on tobacco and alcoholic beverages will only rise in line with inflation, expected to be 1.9 percent next year. Tax on chewing tobacco, however, will rise by 2.2 percent.

Non-alcoholic beverages including soda and water with flavouring look set to become much more expensive, with state tax on them rising by 7.4 percent. And the tax value of a second home will be set at 50 percent of market value, to discourage real estate speculation by posing the threat of formueskatt (fortune tax) on a consequently higher fortune.

Fortune tax ‘improvements’
The standard exemption on fortune tax (which opposition parties want to phase out), though, will rise by NOK 120,000 to NOK 870,000. That means couples will be able to write off NOK 1.74 million of there accumulated net worth before having to pay tax on any remainder. The government claims this is among “improvements” that will leave fewer Norwegians subject to the unpopular fortune tax.

The state plans to reduce some fees on services like registering title to real estate, but a much-hated fee demanded by the state upon sale of real estate (the so-called dokumentavgiften equal to 2.5 percent of the sale price) will stay the same and remain in force.

In other budget items, the state is boosting funding for child protective services by NOK 205 million, allowing staffing to expand by 270. Local governments will be getting more open funding for community services of their choice and around NOK 650 million is being set aside to cover two extra weeks of paternity leave for fathers upon the birth of a child. Couples will now be entitled to 49 weeks of parental leave at full pay or 59 weeks at 80 percent pay, with fathers entitled to 14 of those weeks.

The total proposed state budget, which shows a huge surplus at a time when most countries have huge deficits, is massive in its detail and complexity and will now be debated in Parliament over the next two months. It’s due for a vote in December but most government proposals are likely to be approved since the government coalition parties have a majority in Parliament. English versions of its official presentation can be found here (external link).

Views and News from Norway/Nina Berglund

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