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Government fends off new tax ‘chaos’

Norway’s newly expanded majority government came under fire right away in Parliament this week. Finance Minister Siv Jensen had to fend off a barrage of questions and criticism regarding the “chaos” that’s emerged over how job benefits now must be accounted for, and taxed.

Finance Minister Siv Jensen had to face a barrage of questions and criticism in Parliament this week, from among others Trygve Slagsvold Vedum of the Center Party. Employers, employees and labour organizations are also upset over new rules for declaring the value of job benefits. PHOTO: Stortinget

It’s not a position Jensen would have expected to find herself in. Both Jensen, her Progress Party and the conservative government in general pride themselves on lowering the tax burden on Norwegians. Some new rules that took effect from January 1 are having the opposite effect, however, and suddenly hitting everyone from waiters in restaurants to bus drivers and members of frequent flyer programs very hard.

Employers are upset, too, along with their employees. The new rules were meant to clarify the value of various job benefits, from tips for restaurant servers to discounts given to retail store employees, or free travel passes for bus drivers and their families. Instead it all seems to be backfiring and placing Jensen in the unusual position of having to defend tax rule changes she hadn’t expected would be a problem.

Employers held responsible
Since the beginning of this year, employers were made responsible for declaring to state tax authorities all kinds of benefits granted to employees. Employers, for example, are now supposed to account for frequent flyer bonus points or miles accrued by employees when they’re traveling on business, and declare them as a taxable benefit if used for private travel. Hotel and restaurant employers are supposed to declare tip income on behalf of employees, and subject it to taxes, while even the value of free tickets granted to volunteers at music festival are supposed to be subject to taxation.

It’s all led to loud protests from opposition parties in Parliament, large business associations, national employers’ organization NHO and labour organizations. They all find the new disclosure rules frustrating, unnecessarily bureaucratic, difficult if not impossible to administer and simply unrealistic. In the case of frequent flyer benefits, for example, airlines refuse to divulge information from individual passengers’ accounts, while companies claim they have no way of knowing whether an employee has used frequent flyer points accrued via work travel for private travel. Even the frequent flyers themselves can have trouble discerning which points were earned through work as opposed to their own personal travel, credit card use, hotel or rental car bonus programs.

Yet Jensen’s finance ministry and its internal revenue service remain firm that the new rules must be followed. Jensen has tried to justify the new rules as a means of making sure employees realize the full value of job benefits as an important part of their total income, so that they’ll later in life receive larger pension payments.

‘Sends a bad signal’
Some major employers including Norway’s biggest bank, DNB, and state oil company Equinor have responded by simply issuing a ban against employees using freqent flyer bonuses accrued through business trips for personal use. They hope that will relieve them of the responsibility of tracking all employee travel, frequent flyer memberships and bonus accrual. That remains to be seen, while also leaving it up to employees to abide by the rule, which can in turn be difficult to enforce.

Now some influential politicians within the government’s own parties are rebelling as well, and seeking changes. “I want to take this up as being unwise,” Abid Raja, a Member of Parliament for the Liberal Party, told newspaper Dagens Næringsliv (DN) on Thursday. “I also think it sends a bad signal from a non-socialist government. We’re supposed to be reducing bureaucracy, relieving taxpayer frustration and everyday challenges, and we need to reverse course before it’s too late.”

Things came to a head when a bus driver in the mountainous county of Sogn og Fjordane found out that the value of his free bus passes for himself and his family would leave him with an extra tax bill of around NOK 30,000 (USD 3,600), regardless of how much or how little they rode local bus routes for free.

More trouble than it’s worth
Henrik Asheim, leader of the Parliament’s finance committee for the government’s own Conservative Party, agrees with Raja that all the bureaucracy and frustration in trying to comply with the new rules will also likely result in little new tax revenue. Employers, moreover, are also supposed to pay additional employee tax based on the value of benefits.

“We have taken this up with the finance ministry and asked them to go through all these changes once again,” Asheim told DN. Finance Minister Jensen has continued to defend the new rules, but also claims to be open to “some adjustments.”

Raja believes it’s unrealistic for employers to suddenly be held responsible for their employees’ use of frequent flyer benefits. “That’s why we all have  the selvangivelse,” Raja said, referring to the official name for Norway’s individual tax return forms. The term means “to give of oneself,” he noted, maintaining that it’s up to the individual taxpayer to be responsible for and declare taxable benefits.

Øysteind Dørum, chief economist at employers’ organization NHO, also has warned the government against taxing the value of discounts retail employees may receive for buying and wearing their stores’ merchandise. “I think that can damage both the work culture and the stores’ marketing efforts,” Dørum told DN.

Politicians can get caught, too
Even Norwegian politicians themselves can be caught in a bind while trying to comply with the new rules. The Parliament, for example, has no system for tracking MPs’ work-related travel, and whether they’ve earned bonus points. Others argue that bonus points can be seen as extra compensation for time away from family and friends.

“It’s important that the tax base is not riddled with holes, but these types of changes can to a large degree be more trouble than they’re worth, and viewed as both bureaucratic and petty,” Asheim told DN. “A non-socialist government is supposed to solve real problems for real people, not create problems.”

Jensen, who faced a barrage of criticism in Parliament over the rule changes on Wednesday, claimed the government remains committed to simplifying and reducing the tax burden. “The new rules for taxing benefits aren’t about simplifying things, but instead meant to clarify values and set clear limits,” she said. “The rules earlier have been so unclear that the use of benefits has gone out of control.”

She also noted that employees themselves “pay the price” of benefits if they’re not declared and taxed. She stressed that the rules that took effect January 1 “have been out to hearing and were approved by a majority in Parliament.” She said her ministry had tried to assess what effects they would have.

“If the new rules nonetheless are shown to have unintended consequences, we will see what we can do to adjust them,” Jensen said. She seemed to rule out actually reversing the entire process since she still feels the changes “were both important and correct.” Berglund



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