Labour’s tax relief upstages Høyre

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On the very day that Norway’s Conservative Party (Høyre) was wrapping up its national meeting and rallying its troops to seize government power, Labour Prime Minister Jens Stoltenberg and his finance minister, Sigbjørn Johnsen, were revving up their own power themselves. They gleefully launched a so-called economic “growth package” aimed at boosting private business through changes in the tax law.

Prime Minister Jens Stoltenberg (left) and his finance minister, Sigbjørn Johnsen, seemed to enjoy rolling out their tax reform proposals at a meeting on Sunday as their rivals in the Conservative Party were ending their own meeting. Stoltenberg also addressed the labour confederation LO on Sunday, calling on their support once again in the upcoming election campaign. PHOTO: Statsministerens kontor

Prime Minister Jens Stoltenberg (left) and his finance minister, Sigbjørn Johnsen, seemed to enjoy rolling out their tax reform proposals at a meeting on Sunday as their rivals in the Conservative Party were ending their own meeting. Stoltenberg also addressed the labour confederation LO on Sunday, calling on their support once again in the upcoming election campaign. PHOTO: Statsministerens kontor

The package involves changes in depreciation rules and the first reduction in the overall tax rate since 1992. It will dip from 28 percent to 27 percent for mainland-based companies and for sole proprietors with business income (næringsinntekt). Industrial firms will get some extra tax relief through the depreciation changes, because they’ll be able to write off a larger portion of the cost of investment in their own business.

Not only did the tax relief come as an attempted coup against the non-socialist parties that have advocated such measures for years, it also surprised a special commission that Stoltenberg himself had appointed earlier this year to study such tax changes. As newspaper Dagens Næringsliv (DN) reported, the commission had only managed to have one meeting before Stoltenberg and Johnsen went ahead and made changes of their own.

While some shrugged off the tax relief, saying it came too late, others including commission leader Hans Henrik Scheel of state statistics bureau SSB said it marked fundamental changes in Norway’s tax system. Scheel worried it breaks with some “central principles” regarding tax rates and the pace of depreciation.

Stoltenberg and Johnsen said their goal is to strengthen mainland, non-oil-related businesses to ease the gap between offshore oil- and gas-related companies (which have been performing very well) and those not directly tied to oil and gas (which haven’t  been doing as well). Stoltenberg wants to resist the division that’s formed between Norway’s “two economies” (mainland and offshore) and claimed his government’s tax changes were “just the beginning” of a greater restructuring of the tax burden on business.

Norway’s labour federation LO has long been worried about the differing fortunes of the mainland versus offshore businesses, and Stoltenberg was addressing LO later on Sunday. His Labour party needs LO’s support in the upcoming election campaign

It was clearly no coincidence, though, that the prime minister, keen on being re-elected to a third term, chose to launch the tax initiative while his arch rivals in the Conservative Party (Høyre) were winding up their national meeting with plans of being the most business-friendly government option. Some leaders of both Høyre and the more conservative Progress Party suggested Stoltenberg was “stealing” their own tax programs, but Høyre leader Erna Solberg remained confident voters would realize that her party was the “most credible” option for business.

“The growth package is a confirmation that when the government needs new measures (regarding business), they go into our portfolio,” Solberg told reporters. “We have lots of credibility in these matters.” She did think, however, that Stoltenberg and Johnsen could have waited to publicize their initiatives until Tuesday, when Johnsen was to present the government’s revised state budget.

Views and News from Norway/Nina Berglund

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