Oil companies win some tax relief

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The leaders of Norway’s three largest opposition parties in Parliament finally struck a compromise with the government on Monday that offers some tax relief to oil companies on the Norwegian continental shelf, but not as much as they wanted. The goal is to preserve jobs, even as the country works to reduce its economic dependence on oil.

Norway’s offshore oil industry has plunged into some darker days, because of the Corona crisis, the fall in oil prices and ongoing climate concerns. On Monday it got some relief from the government and Parliament. PHOTO: OED/Arvid Samland

Tax relief proposals for the historically profitable oil and offshore companies has been highly controversial. Debate has raged in recent weeks, and formed more highly unusual political alliances. The conservative, free-market oriented Progress Party once again allied itself with the protectionist Center Party in arguing in favour of supporting the oil industry. Both argued that the state needs to encourage more offshore investment, not least to save jobs within Norway’s large oil supply and offshore construction sector.

Even the country’s national librarian Aslak Sira Myhre, known for a radical left-wing past, sided with right-wing Progress, claiming in a commentary in newspaper Dagsavisen late last week that “the most important crisis package for Norwegian cultural life is the one that goes to oil and industry.” He noted how oil revenues have fueled all the affluence Norwegians now enjoy, not least allowing Norwegian art and literature to flourish not just at home but abroad as well. He hoped the Parliament would secure the oil industry’s ability to “continue to finance not only cultural life but also health care, schools, welfare and transport during the next decade, too.”

Oil firms compared to Kodak
Opponents have argued just as vigorously that it’s unfair if “the businesses that get the most (crisis aid) are those that are the richest and best organized.” Erling Dokk Holm, a Norwegian researcher and political scientist on the faculty at NMBU, warned about the power of oil industry lobbyists in newspaper Aftenposten on Sunday but also about the risks of continuing to invest in fossil fuels. He equated oil to an industry without a long future ahead of it, writing that “just because something has functioned well in the past doesn’t mean it will in the future. Just ask Kodak.”

Holm, whose column summed up much of the arguments against offering relief for oil, also accused politicians of being “weak” and even lacking integrity: “The worst is how the Center Party and the Progress Party applaud the industry’s arguments. They have uncritically swallowed all arguments from the petroleum industry and like to pose as oil’s best friend.”

Prime Minister Erna Solberg fought back on Monday, claiming that Norwegian politicians have earlier proved that they indeed have the “backbone” to resist the oil lobby, and undertake an “independent evaluation” of how things should be, regardless of the pressure they put on us.” She worried over the weekend that Norway will face a jobs crisis after the Corona crisis, but her minority government earlier opposed special tax relief for oil. She and her finance minister, Jan Tore Sanner, only partially gave in to some measures (like temporarily being able to write off investments over just one year instead of six) when they realized they lacked a majority in Parliament for their initial position.

But then the opposition parties teamed up and wanted to offer much more tax relief, even, for a while, a reduced company tax (selskapsskatt) for oil that the government feared would set a precedent and be demanded by other non-oil companies as well. The government was soon under seige, with Labour Party waffling in the middle but also in a position to propose compromises.

Weekend ‘time-out’
The party leaders ultimately called a “time-out” Friday afternoon. “Then we can each think things through, also across party lines, and see how we can take up discussions again on Monday,” Labour Party leader Jonas Gahr Støre told reporters heading into the weekend. He stressed that no one had left the table, apart from one of his usual allies, the Socialist Left party (SV), along with the Greens and Reds parties, which were firmly opposed to tax relief for the oil and offshore business.

In the end there were two different models for taxation, one that would cut company tax for oil (which the industry badly wanted) and another that would provide extra tax deductions. Newspaper Dagens Næringsliv (DN) reported that there would be no changes in the company tax after all but there will be “temporary changes” in how oil companies are taxed. Oil companies will be allowed to earn more money before paying oil taxes of 56 percent, effectively a larger tax deduction on investments this year and next, along with deferred taxes that collectively are estimated to cost the state NOK 8 billion over the next six years. An eight-point plan presented by Solberg’s Conservatives also includes measures for so-called “green investments” and emission reductions on the Norwegian Continental Shelf, and makes plugging of wells a priority.

‘Broad agreement’
“We’re very glad to be able to present broad agreement about these temporary tax changes to secure jobs and activity in Norway’s most important business,” Trond Helleland, head of the Conservatives’ parliamentary delegation, said at a press conference Monday afternoon.

Labour and Progress claimed to be pleased as well. “The Corona crisis and fall in oil prices have created a very demanding situation for oil, gas and the supply industry,” Labour’s Støre said. Progress leader Siv Jensen also defended the compromise: “I know that some have claimed this is a big gift to the oil companies, but I strongly deny that. This is first and foremost a solution that contributes towards the entire industry …. getting a more secure framework in a very uncertain situation.”

‘Loss for the state, and climate’
Others remained critical. “This is a loss for the state and a loss for the climate,” claimed Kari Elisabeth Kaski, finance policy spokesman for SV. “This is one of the most short-term decisions I have seen in Norwegian politics in recent years.” No fewer than eight professors of economics at the University of Oslo seemed to agree, after publishing a lengthy commentary in Aftenposten over the weekend noting that “subsidies to the oil industry won’t help restructure the economy.”

Kjersti Haugland, chief economist at DNB Markets in Oslo, has earlier noted, however, that Norway’s dependency on the oil industry is already greatly reduced from it was before the last oil price dive in 2014. The Corona crisis can still prod along the need to restructure the economy more away from oil, but oil companies’ costs have declined, they’re less reliant on the record high oil prices several years ago and far fewer people work in the oil industry now than they did in 2014.

Oil and gas exports accounted for 51 percent of total exports in 2008, but now just 33 percent. And while oil accounted for 26 percent of gross national product in 2008, it accounted for 14 percent last year, according to state statistics bureau SSB.

NewsInEnglish.no/Nina Berglund