Norway has long been known as a high-tax country but only now are most residents getting hit with direct assessments on their residential or commercial real estate investments. Local government officials who shied away from levying unpopular property tax to shore up community finances have felt compelled to do so, and property tax bills are rolling in, not least in Oslo.
Within the space of just a week last month, hundreds of thousands of Oslo wage-earners received both their annual tax-free holiday pay (feriepenger) and state income tax refunds, only to also get a new property tax bill from the city. Oslo’s new Labour Party-led city government that was elected last year quickly set about implementing a campaign promise to invoke property tax with its revenues earmarked for elder care and day care for children.
It’s the latest local property tax to be levied in Norway, as local governments (kommuner) turn to it as a means of raising new funds to finance the social welfare state. Newspaper Dagens Næringsliv (DN) reports that another 93 local governments have invoked property tax since 2007. A total of 63 local governments still collect no property tax of any type, while 365 now do.
Norwegian municipalities are free to levy property tax “and we had to bite into the sour apple ourselves,” the mayor of Re in Vestfold County, Thorvald Hillestad, told DN. Beginning this year, property owners among Re’s roughly 9,000 residents will need to pay “a few thousand kroner” per year to raise money for construction of a new junior high school and other needed maintenance projects. The mayor’s only comfort is that property tax is a source of local revenue that local officials can also freely decide how to spend.
“We know that this (property tax) is an unpopular tax, and not something local politicians impose willingly,” Helge Eide of KS, the organization that represents local governments nationwide, told DN. Local governments in Norway are responsible for providing most public services from schools to day care and elder care including nursing homes, with most of their funding transferred from the state. Local leaders regularly complain, however, that the funding runs short and if no extra state money can be granted, property tax is a last resort.
Legal challenges loom
State statistics burean SSB (Statistics Norway) reports a steady increase in property tax assessments over the past decade, even though property tax amounts remain relatively low. Ten new municipalities imposed property tax last year, with the amounts varying. The small community of Vennesla outside Kristiansand tops the list for charging the highest level of property tax, with owners of a 120-square-meter home, for example, charged an average of NOK 9,400 (USD 1,100) per year.
In Oslo the city-wide average bill will be NOK 4,781, with wide variations among neighbourhoods. City officials are using the tax values assessed by the state tax authority Skatteetaten in 2014 when determining the state’s own fortune tax. Given how property values have risen since then, the tax values are generally lower than market value. The tax value has also been reduced by 20 percent and further by a standard deductible of NOK 4 million. The remaining amount is then taxed by 2 promille (two-tenths of a percent).
That means that owners of property valued at NOK 5 million (around USD 600,000) or less will pay no tax at all, given the 20 percent reduction and NOK 4 million deductible. It also means that only owners of relatively expensive properties will pay, raising questions of whether the tax is fairly or even legally spread among the city’s population. There already have been threats of lawsuits against the city by those claiming that only around 42,000 homeowners in affluent districts will end up paying more than 80 percent of the tax. Robert Steen, in charge of Oslo’s finances for the Labour Party, doesn’t think that’s unreasonable.
Complaints rolling in, too
“We have a principle in Norway that those able to contribute more (through taxes) do so,” Steen told newspaper Aftenposten. In the affluent district of Vestre Aker, which includes areas like Holmenkollen and Ris, 70 percent of homeowners will get tax bills. In the east-side lower-income district of Stovner, only 11.8 percent of homeowners will need to pay property tax.
Complaints were also streaming in, after tax bills started being sent out in late June, over vast differences in tax amounts attached to comparable properties. Aftenposten reported over the weekend how owners of the 48 units in one row-house project in Oslo’s Løren district have received a wide range of tax bills, from more than NOK 3,000 to no tax owed at all – all because the units’ tax values were assessed at different levels.
Property owners in Oslo have six weeks, until mid-August, to file complaints over their property tax assessments. The tax bills themselves can be paid in two installments, one due on October 1 and another on November 1.