It’s already being billed as the question behind possibly this spring’s hottest debate in Norway: Should the country’s huge “oil fund” continue to be allowed to have a presence in countries viewed as tax havens? Finance Minister Siv Jensen claims she’s ready to discuss the issue, which has landed on politicians’ agendas once again in the wake of disturbing disclosures from the so-called “Panama Papers.”
The issue has come up before but ended in defeat last year of a measure aimed at forbidding the oil fund from investing in companies registered in low-tax countries. Now revelations that Norway’s two biggest banks have helped set up accounts for wealthy customers in such so-called tax havens have sparked widespread outrage, and brought the oil fund’s investment activities under new scrutiny as well.
The oil fund currently holds stock in several companies registered in what’s been described as “pure tax havens” like the Cayman Islands, Guernsey and Panama. The fund’s real estate investments have been placed in subsidiaries registered in countries like low-tax Luxembourg and the low-tax state of Delaware in the US. The total asset value of such stock and real estate holdings is estimated at around NOK 200 billion (USD 24 billion).
“Norway can have a serious clarification problem if we continue to use one of the world’s largest investment funds to legitimize states that hide corrupt money,” Snorre Valen, finance policy spokesman for the Socialist Left party (SV), told newspaper Aftenposten this week. “We have an historic opportunity here to pull the oil fund out of these tax paradises that threaten all countries’ welfare and democracy.”
Norway’s oil fund has long been viewed as a socially progressive fund, guided by a state ethics committee and known for dumping shares in companies determined to have exploited workers, for example, or for producing coal that damages the climate. Some top Norwegian politicians and transparency advocates think the oil fund should now lead the way in dumping companies based in countries that at the very least can enable minimal tax revenue contribution.
Finance Minister Jensen, who presented the government’s annual round of proposals for managing the oil fund in Parliament on Tuesday, says she looks forward to a new “discussion” over what some call “offshore” investments made by the oil fund. It ranks as the world’s largest sovereign wealth fund, and has become a powerful player in the investment world.
The fund, formally called Statens pensjonsfond utland, remains first and foremost a pension fund. Jensen’s latest proposals for placing its billions generated by oil revenues continued to concentrate on stockmarket investments in regulated markets, along with some real estate. Jensen did not support proposals from some politicians and environmental organizations to invest some of the fund’s money in other ventures such as renewable energy, power plants, drinking water systems or other non-stocklisted infrastructure projects. Proponents of such investments argued they could prod the “green shift” towards a more environmentally friendly economy in Norway that’s not so reliant on the oil industry.
Jensen, however, doesn’t see very good prospects for high returns on such investments that also involve a higher level of risk. The oil fund, she and many others argue, amounts to the Norwegian population’s “piggy bank” for generations to come, and it needs safe investments, albeit with the highest possible rates of return. It has done very well since its founding in the mid 1990s and recently reported relatively strong returns also for last year, despite low oil prices and market turbulence.
New political alliances as debate looms
The fund’s investments will come up for debate when Members of Parliament discuss the government’s annual Stortingsmelding om forvaltning of Statens pensjonsfond that Jensen presented. Its contents had pretty much been assured support from a majority in Parliament, but now the minority government coalition’s two support parties are raising questions about the fund’s own tax haven activity. Aftenposten, which has been part of the international “Panama Papers” probe that’s disclosing tax haven use around the world, reported that the Christian Democrats are considering a reversal of their own rejection of last year’s proposal to ban oil fund investments in companies registered in tax havens. The government’s other support party, the Liberals, was part of proposing the ban last year along with the Greens, the Socialist Left and Center parties that was rejected. The Liberals haven’t changed their minds and now Labour is also evaluating a turnaround. If the Christian Democrats join it, they’d have a majority.
Jensen claimed that she’ll “gladly” debate at least restrictions on tax haven activity once again. She refused, however, to answer whether she thinks current regulations provide enough protection from potential tax evasion by companies registered in such low-tax countries.
“We must continually address these questions and the debate will never end,” Jensen told news bureau NTB. She still doesn’t think a blanket ban on investments in so-called tax havens is a good idea.
“I see that the issue is coming up again in the discussion tied to the (Panama Papers) disclosures, and these are questions natural to discuss at the hearing that the (Parliament’s) finance committee will hold,” Jensen said.
Differences among ‘tax havens’
She stressed, however, that there are differences among the various states and countries with low-tax regimes. Some offer lower taxes purely to attract business and industry, while others have tax systems aimed at allowing companies to avoid tax and reporting requirements, in return for fee income.
Asked whether the government will at least formulate expectations for companies registered in tax havens, Jensen said her ministry was working quickly to have information ready for the parliamentary hearing later this month.
“It’s a good opportunity to highlight these issues and tidy up terms used (for various low-tax countries),” Jensen told Aftenposten. “It will be a challenging discussion and we should begin with that. This debate can create a foundation for new orders for the oil fund.” Jensen, from the conservative Progress Party, also stressed that she’s “strongly opposed” to establishment of any ventures in low-tax countries that are meant to evade taxes.