The Ministry of Finance will tomorrow, Friday, present a proposal on amendments to the petroleum taxation legislation. – The amendments will improve the structure of the tax system, whilst invigorating the petroleum activities by easing the conditions for new participants, says Minister of Finance, Mr. Karl Eirik Schjøtt-Pedersen.

Due to the debate today in the Storting on the Statoil ownership and the administration of the SDFI (State Direct Financial Interest), the main elements of the proposed amendments are announced today.

The amendments are based on the proposals of the Expert Committee on Petroleum Tax (NOU 2000: 18), the submissions thereto and comments received in response to the Ministry’s letter of 6 April on possible amendments to the petroleum tax system being contemplated.

• A well working petroleum tax system for the petroleum industry is very important for Norway. The system therefore needs improvements. I have given weight to the inputs submitted by the industry. On further consideration the Government has therefore decided not to put forward proposals on changes to the rules regarding uplift, says the Minister of Finance, Mr. Karl Eirik Schjøtt-Pedersen.
• The Government’s proposal addresses two of the most important flaws of the existing tax system pointed out by the Expert Committee. These are the weaknesses of the present rules on allocation of financial costs and the need to reduce the entrance obstacles for new participants caused by the tax system. The new rules on allocation of financial costs will contribute to avoiding erosion of the special tax base. Loss carryforward enhanced by interest can stimulate more companies to take part in the activities on the Norwegian continental Shelf, says the Minister of Finance.

The selling of shares in Statoil and parts of the SDFI prompts the need to put forward the proposals now in order to clarify the state of the tax rules, says the Minister of Finance, Mr. Karl Eirik Schjøtt-Pedersen.

The main elements of the tax proposals are the following:

• New rules to prevent that financial costs attributable to activities outside of the Norwegian continental shelf are deducted against the petroleum tax base. Deductible financial costs will be allocated based on written down tax values. However, an adjustment is added to ensure that it will not be necessary for a company engaged in activities outside the continental shelf to maximise the allowable debt under the "thin capitalisation" rules in order to enjoy maximum interest deduction in the offshore tax base. The proposal thus deviates from what was outlined in the letter of 6 April.
• Deficits in petroleum income will be carried forward increased by interest. This will stimulate the participation of new entrants on the continental shelf. Furthermore, the Ministry will propose a new rule to allow losses in case of disposal of the business activities or merger of companies to be transferred to companies acquiring the business. At the same time losses arising from onshore activities will no longer be deductible against offshore income.