Norwegian taxpayers seem to be getting some unexpected relief from an unlikely source: Labour Prime Minister Jens Stoltenberg, whose party won last week’s election but lost government power, is cutting inheritance tax and trimming a controversial tax on net worth in the state budget that his left-center government coalition will present just before resigning from office.
The move, revealed through budget leaks to newspaper Dagens Næringsliv (DN), at the very least steals some thunder from the four non-socialist parties now huddling to form a new right-center government. They’ve been advocating tax cuts and some even want to eventually eliminate the tax on net worth (known as formueskatt, literally “fortune tax”).
Now taxpayers may be able to thank the outgoing government for at least a first and early phase of tax relief. While the proposed reduction of fortune tax may be small, with the exemption on asset value raised only by NOK 130,000, the proposed cut in inheritance tax is considered substantial. Stoltenberg, reports DN, plans to raise the basic exemption on values inherited to NOK 1 million, up from NOK 470,000 today.
That means a child, for example, can inherit up a million kroner from each parent for a total of NOK 2 million (USD 333,000) without facing any tax liability. Additional values inherited are taxed on a sliding scale, currently 6 percent on the next NOK 330,000 and 10 percent on the remainder. If those rates are maintained, Norwegians inheriting an estate from both parents valued at NOK 5 million will save just over NOK 100,000 in inheritance tax (called arveavgift in Norwegian) under the Stoltenberg government’s proposals.
Guttorm Schjelderup, a professor at Norwegian business school NHH (Norges Handeslhøyskole), confirmed to DN that the proposed reduction in fortune tax “isn’t so much in practice,” and small in comparison to what the Conservative Party, which will lead a new non-socialist government coalition, has promoted. Stoltenberg’s proposed cut in inheritance tax, however, amounts to “a much larger change in tax policy,” Schjelderup said.
He thinks it will “exciting” to see how much of the tax relief now put on the table by an outgoing government not known for cutting taxes will or can be realized in the new government. Stoltenberg’s proposals may challenge the new government, not wanting to be outdone or shown up by their socialist rivals, into offering even bigger tax breaks in the state budget finally approved, but funding to offset them will have to come from somewhere, possibly from oil revenues.
Schjelderup also thinks it will be most interesting to see how the rules for calculation of asset value may change. They currently favour real estate investments, which are taxed at values far below market value in fortune tax calculation, and that may change in line with efforts to cool down Norway’s hot real market.
Even though Stoltenberg’s Labour Party emerged as the largest in Norway after last week’s parliamentary election, his fellow parties in the government he’s led since 2005 lost voters. His coalition thus failed to win a majority against the four non-socialist (borgerlige) parties, which are now trying to form their own coalition.
Stoltenberg has promised, though, that his party’s goal is to “continue to be the leading political power in Norway, also in opposition.” The tax breaks his outgoing government is proposing confirms they’re still wooing voters, even after losing government power.