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Thursday, July 18, 2024

Finance minister closes tax loophole

Finance Minister Sigbjørn Johnsen said Monday that the government was poised to shut a tax loophole that’s been exploited by multinational companies doing business in Norway. Now the government intends to limit the possibilities they have to move profits among various units to avoid tax liability.

Finance Minister Sigbjørn Johnsen is taking steps to reduce multinational companies' ability to avoid paying taxes in Norway. PHOTO: Finansdepartementet
Finance Minister Sigbjørn Johnsen is taking steps to reduce multinational companies’ ability to avoid paying taxes in Norway. PHOTO: Finansdepartementet

Through use of creative accounting and exploiting differences in tax laws between countries where they’re operating, highly profitable companies from Google to Starbucks have been legally able to ease their tax burden in highly-taxed locations. Companies have recognized the advantage of having high costs and seemingly low profits in the Norwegian sectors of their business, for example, and have sent profits over to units in countries where tax rates are lower.

Johnsen said the Norwegian government is now considering limiting multinationals’ ability to deduct interest expenses on debt. “This is being done in several other countries to take care of the tax base and ensure that taxes are paid in the countries where the value is created,” Johnsen told Norwegian Broadcasting (NRK).

Johnsen said his ministry’s proposal, due to be sent out for hearings shortly, can generate billions for the state treasury. There will no longer be an incentive for multinationals to finance major purchases by placing their debt in Norwegian subsidiaries, for example, with the main purpose of reducing taxable income.

Norway would be among the last countries in Europe to limit interest rate deductions and close the tax loophole, but Johnsen denies he and his staff have been asleep at the wheel. “This is something that’s only been done in the wake of the finance crisis when countries are looking for ways to increase their income not just cut costs,” Johnsen told NRK.

Sigrid Klæboe Jacobsen of the global organization Tax Justice Network in Norway seemed glad to hear Johnsen was closing the loophole, claiming that current laws “are totally out of date.” She said multinational companies largely have been able to choose where they will pay tax and how much they will pay.

Views and News from Norway/Nina Berglund

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