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Sunday, July 14, 2024

Tax cuts, defense among priorities

While economists were generally praising the Norwegian government’s proposed state budget for 2020 on Monday, debate was already flying over how the conservative coalition plans to spend taxpayers’ money. Here’s a rundown of some of the budget’s key priorities and provisions.

Norway’s state budget for 2020 contains some tax relief, lots of new climate measures, “full financing” for defense needs and thousands of other items across the full range of ministries. It will now be debated within parliamentary committees for the next two months. PHOTO: Stortinget

They’re driven by a state government attempt to lower taxes for a majority of Norwegians. Finance Minister Siv Jensen from the Progress Party, which has long topped its priorities with tax relief, claims that “a normal family” with two full-time incomes will pay NOK 9,000 less in taxes than they did in 2013, when the current government first won election. She also claimed that the tax burden for the same family will be NOK 48,000 less than what they’d be paying if the red-green opposition parties were in power.

There will be no changes in Norway’s so-called “fortune tax” on individual net worth. The rate for private residents will remain 0.85 percent of taxable fortune to the state and municipality on net worth over NOK 1.5 million. Income tax will decline slightly since tax brackets will rise by 3.6 percent, more than average pay raise levels. The standard individual deduction on tax forms will decline, but not by as much as what will be needed in the state budget to cover the elimination of the roughly NOK 3,000 annual household fee to finance state broadcaster NRK.

There will be no increase in Norway’s VAT on goods and services and the state government also is setting a lower ceiling on how much local governments can charge for property tax. They were able to charge 7 percent of assessed value, which already was lowered to 5 percent. Now they’ll be able to charge no more than 4 percent, although many municipalities find creative means to maintain property tax revenue by raising assessed values.

Some road toll relief
Motorists are also due for some road toll relief in Norway’s nine largest urban areas, in line with a difficult compromise finally reached among the four parties making up the country’s conservative coalition government. The government will fork over a total of NOK 5.4 billion to help reduce road tolls, improve public transport and extend bike lanes. NOK 1.4 billion is aimed at reducing road tolls outside urban areas.

There will be some increases, however, in Norway’s high punitives taxes on tobacco (up 1.9 percent) and alcoholic beverages (up 2 percent), and there will be no cuts in the controversial “sugar tax” that earlier raised the price of soft drinks and candy. Critics suggest Norwegian consumers will simply continue to drive over the border to Sweden, when prices for and taxes on such items are much lower.

Regarding funding of projects, the new budget calls for an extra NOK 1.58 billion to strengthen hospitals and another NOK 400 million to build and renovate more nursing homes. That likely to propel plans to build a new main hospital in Oslo at Gaustad, near the current national hospital Rikshospitalet, to eventually shut down and replace Norway’s largest hospital, Ullevål. The plans are highly controversial, and conflict with what local politicians want to do in Oslo.

Climate and defense funding jumps
A total of NOK 7 billion is earmarked for climate measures, including NOK 1.8 billion to promote renewable energy project. The funding will be used for developing climate-friendly technology, forest preservation, transport improvements, emissions cuts within agriculture and fisheries and foreign aid projects. There are no plans, however, to curtail oil exploration and production, which is the single biggest source of Norway’s carbon emissions.

The biggest budget winner for next year is arguably the defense department, which is due to receive NOK 2.4 billion extra to fulfill new long-term plans. Defense chief Haakon Bruun-Hanssen is due to outline his plans and priorities on Tuesday, while the funding is expected to provide for more soldiers, address needs for maintenance of property and equipment and basically boost defense operations.

The money will also help Norway meet NATO’s goal that all members spend at least 2 percent of GNP on defense. Norway has been spending 1.6 percent, but will now be closer to 1.8 percent. Defense Minister Frank Bakke-Jensen noted that Norway’s GNP keeps rising, but that 2 percent “remains the goal.”

There are still no plans to replace the sunken frigate KNM Helge Ingstad, which collided with an oil tanker in home waters northwest of Bergen last year. That cut Norway’s small frigate fleet by 20 percent but Bakke-Jensen and defense officials have promised “compensatory measures” to replace the loss. Berglund



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