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Wednesday, May 18, 2022

Høyre backs big fortune tax cuts

With the campaign well underway towards national elections later this year, Norway’s leading opposition party Høyre (The  Conservatives Party) has proposed making large cuts in the country’s unpopular fortune tax (formueskatt). The proposal was met with resistance, however, even from all of Høyre’s potential coalition partners, who say the cuts will only benefit the wealthiest of Norwegians.

Høyre's leaders (from right) Erna Solberg, Jan Tore Sanner and Bent Høie are proposing cuts in Norway's unpopular fortune tax that are surprisingly large. PHOTO: Høyre/Tomas Moss, icu.no
Høyre’s leaders (from right) Erna Solberg, Jan Tore Sanner and Bent Høie are proposing cuts in Norway’s unpopular fortune tax that are surprisingly large. PHOTO: Høyre/Tomas Moss, icu.no

The issue of the fortune tax is likely to remain a matter of debate throughout the campaign towards the election in September. The tax is levied on the net worth of both individuals and businesses, comes in addition to income tax and means assets can be taxed over and over again, year after year. The ruling left-center coalition government, headed by the Labour Party (Arbeiderpartiet, AP) has taken steps towards easing the tax in recent years, but claims it needs to be maintained to ease the gap between wealthy and poor. It also makes a substantial contribution to the national treasury.

Høyre, keen to form a government with other non-socialist parties this year, wants to reduce and eventually remove the tax, claiming it hurts small and family-owned businesses as well as retired persons who generally have little debt that can reduce the assessed value of assets such as their homes. Høyre is, however, open about the fact that wealthier citizens will also reap benefits from its proposed cuts, but stressed to newspaper Dagens Næringsliv (DN), for example, that measures will be taken to prevent any taxpayers from dodging taxes entirely.

In position to rule
Høyre has had a firm grip on recent public opinion polls and seems well in position to win government power either on its own or as leader of a coalition that could include some of Norway’s other non-socialist parties such as the Progress Party (Fremskrittspartiet, Frp), the Liberals (Venstre) or the Christian Democrats (Kristelig Folkeparti, KrF).

Høyre and Frp both have said they’d abolish the tax if they win government power next year. Frp, traditionally the biggest supporter of the removal of the tax, has recently confused voters, however, after opposition from its own members said other tax relief measures are more important. Frp leader Siv Jensen has stressed the party will still make abolition of the tax a priority.

Even if Frp, Venstre and KrF believe it will be possible to negotiate a solution to the tax issue, Høyre was left fending off criticism of its fortune tax cuts this week from all its potential future allies.

Høyre’s proposal would mean a tax cut of NOK 12 billion (USD 2.2bn) over the next four years, according to newspaper Aftenposten. The government today brings in around NOK 16 billion -17 billion each year through the fortune tax. Høyre wants to gradually make the cuts by raising the level of tax exemption on asset value to as much as NOK 25 million from today’s NOK 870,000, and reducing the tax rate from 1.1 percent to 0.5 percent by 2017.

“I’m surprised Høyre wants to cut the tax level to 0.5 percent,” Ketil Solvik-Olsen, Frp’s fiscal spokesman, told DN.  “I think that will give the wealthiest a tax break that far exceeds a normal yearly income,” he said, adding that he believes families on tight budgets will have problems accepting Høyre’s tax proposal. Frp wants to raise the level of fortune tax exemption to 30 million but keep the tax level unchanged.

With Høyre’s proposal, the 500 wealthiest people in Norway would get an average tax cut of NOK 3.1 million each, while the 1,000 richest will save around NOK 2 million, according to calculations made by Statistics Norway (Statistisk Sentralbyrå, SSB) and the Ministry of Finance, reported DN. The proposal would, for example, give one of Norway’s richest men, investor Johan Henrik Andresen, a tax break of about NOK 60 million, according to DN.

Also KrF leader Knut Arild Hareide was skeptical, saying they do not envisage such big reductions in the fortune tax as outlined by Høyre. Venstre leader Trine Skei Grande said she thinks it will be possible to agree on a common platform.

Praise for the specifics
Høyre also said this week that its long-term goal is to get rid of the fortune tax altogether, but that an expert committee would need to look at how to avoid winding up with so-called “zero-tax” payers.

“It’s positive that Høyre is specific about how they want to change the fortune tax,” Professor Guttorm Schjelderup at Norwegian School of Economics (Norges Handelshøyskole, NHH) in Bergen told DN, adding he was still surprised over the large cuts Høyre proposed.

He said most people as well as small- and medium-sized businesses would not reap the benefits with this proposal. “The tax reductions will in reality be a reduction for the wealthiest people,” Schjelderup told DN.

Views and News from Norway/Aasa Christine Stoltz

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