Direct and Indirect Taxes - Main Features of the 2008 Proposal

1) Excluding changes to indirect taxes. Rounded off to the nearest NOK 100.
Sources: Statistics Norway and the Ministry of Finance.

 

 

A focus on climate and the environment

The Government has, through the Climate Report, defined an ambitious climate policy, including the procurement of quotas abroad and measures to reduce greenhouse gas emissions domestically. The Government emphasises the use of cross-sectoral, cost-effective measures like taxes and quotas. It is therefore important to ensure that these measures encompass as many sources of emission as possible. Over time, the Government is aiming for the most comprehensive quota system possible. The Government is therefore also contemplating the inclusion of other activities that are not subject to mandatory quotas in the EU countries. It was announced in the Climate Report that the Government will increase environmental and climate taxes, and offset this by corresponding reductions in other direct and indirect taxes. The budget proposal contains a number of proposals of this nature:

• The CO2 tax on mineral oil for use in domestic aviation is increased by 10 øre per litre. The proposal is assumed, on an uncertain basis, to increase net revenues by NOK 50 million accrued in 2008.
• The base tax on heating oil, etc., is increased by 40.5 øre per litre, thus bringing this tax in line with the electricity tax. The proposal is estimated to increase revenues by NOK 550 million accrued in 2008.
• The motor vehicle taxes are changed by way of environmental differentiation of the annual tax on motor vehicles, by increasing the vehicle scrap deposit refund on a temporary basis for older vehicles with high local emissions, and by increasing the diesel tax. In aggregate, these changes will entail a tax reduction of NOK 155 million accrued in 2008.

Motor vehicle taxes – Additional details

It is proposed, as was announced in the 2007 budget, that the annual tax on motor vehicles for 2008 be environmentally differentiated. This is achieved by reducing the annual tax on motor vehicles by NOK 330 on all vehicles, except for diesel vehicles without a factory-fitted particle filter. These vehicles will be subjected to a tax increase in the amount of NOK 100. Such differentiation provides an incentive to acquire vehicles with relatively low local emissions, like, for example, diesel vehicles with a factory-fitted particle filter. One also proposes a temporary increase in the vehicle scrap deposit refund for vehicles with high local emissions. In aggregate, this entails a tax reduction of NOK 590 million accrued in 2008.

The existing tax differential between auto diesel and petrol cannot be justified by differences in the environmental costs associated with these two types of fuel. The Government therefore proposes a reduction in this difference by increasing the diesel tax by 20 øre per litre. The proposal is estimated to increase revenues by NOK 415 million accrued in 2008.

These changes to motor vehicle taxes will, when taken together, contribute to a reduction in local motor vehicle emissions that are harmful to health and the environment.

The Committee on Excise Duties

The Committeeon Excise Duties submitted its report on 22 June 2007. The Committee has looked at how the current excise duties meet the objectives of generating revenues for the State and adjusting for external costs in the best possible manner. The NOU 2007: 8 Green Paper, An Examination of Excise Duties, has been circulated for comments, with a deadline of 20 October 2007.

Reduction in overpriced government fees

The use of sectoral duties and fees to fund the provision of government services has become very widespread. In June 2006, the Ministry of Finance laid down new guidelines to clarify which conditions shall be met in order to justify the introduction of sectoral duties and fees within an area. The guidelines entered into force immediately as far as new schemes are concerned, whilst one is aiming for the gradual adaptation of existing schemes. The new guidelines also imply a clearer budgetary distinction between sectoral fees and duties.

The Government proposes changes to sectoral fees and duties representing an annual revenue loss of NOK 254 million. The passport fee will be reduced to a level matching costs. This implies a fee reduction of NOK 207 million in 2008. In addition, the fees for registration in the Brønnøysund Register Centre are reduced by NOK 50 million, and the fees relating to the Register of Certified Fishing Vessels by NOK 10 million. The sectoral duty charged to fund the activities of the Financial Supervisory Authority of Norway is increased by NOK 13 million.

The Government will continue to reduce overpriced government fees in future budgets. Reference is made to more detailed coverage of the various proposals in Proposition No. 1 (2007–2008) to the Storting for the relevant sectoral ministries.

Changes to the taxation of businesses

The current tax regime for shipping companies results in new investments in shipping being channelled, to a large extent, to companies registered abroad rather than in Norway. The Government proposes the replacement of the current tax regime for shipping companies by a regime under which the companies are exempted from corporation tax, in line with regimes adopted by a number of EU countries. This will make investments in Norwegian shipping more attractive.

It is further proposed that companies encompassed by the tax regime for shipping companies shall, when transferring to the new Norwegian tax regime for shipping companies, pay two-thirds of their accrued tax liabilities as per 1 January 2007, over a period of ten years as from the 2007 tax year, in equal annual instalments. It is proposed that the remaining one-third of the tax liabilities can be retained by each company in the form on an allocation to a reserve for environmental measures, etc. Approved environmental investments have to be made by yearend 2016. Any unused reserves will otherwise be repaid to the State. These changes are estimated to increase booked revenues by about NOK 1.4 billion in 2008.

The Government proposes certain changes to the tax rules pertaining to hydropower production. The objective is to stimu­late economically profitable investments in this sector, whilst ensuring that a reasonable share of the earnings of power companies with high profitability are set aside for communal purposes. One therefore intends, inter alia, to permit the consolidation of new, negative economic rent income at company level, and to abolish the risk supplement applicable to interest for purposes of calculating economic rent tax. Furthermore, the Government proposes that the rate of economic rent tax be increased by 3 percentage points, to 30 pct. It is proposed that these changes be introduced with effect from the 2007 tax year. The proposals increase booked revenue in 2008 by NOK 280 million. It is proposed, at the same time, that the lower threshold for paying economic rent tax for power plants be reduced, and that any operations subsidy be included in the economic rent income. It is proposed that these changes be introduced with effect from 2008, which will increase revenues by NOK 38 million accrued in 2008.

The Government also proposes a change in the rules for calculating the minimum and maximum limits defining the real estate tax base for new power plants. It is estimated, on an uncertain basis, that revenues from the real estate tax in the affected municipalities will increase by NOK 25 million accrued and booked in 2008.

Other changes to direct and indirect taxes

The Government is also proposing a number of other changes to direct and indirect taxes:

• One will introduce a tax-favoured pension scheme from 2008, with a maximum annual allowance of NOK 15,000, in line with the pension compromise agreed by the Stortinget. The proposal implies an accrued tax reduction in 2008 in the amount of NOK 500 million.
• The allowance for labour union fees is increased by NOK 450 to NOK 3,150. This represents a tax reduction of NOK 95 million accrued in 2008.
• The supplement in the parent allowance for each child in excess of the first one is increased from NOK 5000 to NOK 15,000. The proposal is estimated, on an uncertain basis, to reduce revenues by NOK 200 million accrued in 2008.
• Costs incurred in the administration of contribution based pension schemes shall not longer be included for purposes of calculating the contribution limit. This proposal implies a revenue loss of about NOK 8 million accrued in 2008.
• The exemption limits applicable to the payment of employer’s social security contributions for voluntary organisations are increased to NOK 450,000 (limit on overall wage costs) and NOK 45,000 (limit per employee), respectively. The Government also proposes an increase in the exemption limits applicable to the duty to submit salary statements to the tax authorities for voluntary organisations, from NOK 2,000 to NOK 4,000. The proposals imply a tax reduction of NOK 40 million accrued in 2008.
• Certain monetary limits will remain unchanged in nominal terms, hereunder the special allowance against wage income, the lower threshold for the payment of social security contributions, the special allowance for Finnmark and Northern Troms, the fishermen’s and seamen’s allowance, the travel allowance, the allowance for gifts to voluntary organisations, the special allowance for high expenses related to sickness and the maximum tax credits for home savings for people under the age of 34 years (BSU). The overall increase in tax revenue is estimated at NOK 255 million accrued in 2008, including interactive effects.
• A tax exemption is introduced on the wealth of research institutes that receive basic appropriations, and that are organised as research foundations. The proposal represents a tax reduction of about NOK 5 million accrued in 2008.
• The part of income from equities encompassed by the rate of return allowance is to be included in the income base for purposes of the 80-percent rule on the limitation of the wealth tax and the tax limitation rule. The proposal rectifies an unintended consequence of the tax reform, and is expected to have a limited effect on revenues.
• The lower limit of the agriculture allowance is increased from NOK 45,000 to NOK 54,200. The proposal is a compensation for the proposed increase in the base tax on heating oil. The limits and rate of the special allowance for slate production are increased to the same level as for the agriculture allowance. In total, these proposals represent a tax reduction of about NOK 32 million accrued in 2008.
• Capital gains from the sale of agricultural land are to be taxed as ordinary income only, and not to be included in computed personal income, if the aggregate annual gain is less than NOK 150,000. The proposal implies a tax cut of about NOK 10 million accrued in 2008.
• The forestry factor applied when determining the assessed values of forests is to be reduced from 8 to 4 for the 2007 tax year and to 5 from 2008. The proposal is estimated to reduce revenues by about NOK 6 million accrued in 2007, and to increase revenues by about NOK 1 million accrued in 2008.
• A requirement for employees to document actual lodging expenses from business travel will be introduced, and any lodging allowance in excess of the documented expenses will be taxed. It will still be profitable for employees to choose hotels that cost less than the lodging allowance. The proposal is estimated to increase revenues by NOK 100 million accrued in 2008.
• The tax exemption for income from letting more than half of one’s home for less than half of the calendar year is to be abolished. Low letting income is exempted through the introduction of an exemption limit of NOK 20,000. The proposal represents a tax increase of NOK 55 million accrued for 2008.
• One will introduce a tax exemption for the employer’s payment of kindergarten expenses in excess of the maximum price as from the 2007 tax year. The proposal implies an accrued tax reduction in 2007 in the amount of NOK 11 million.
• Government employees are to be taxed on the benefit from free housing abroad. This proposal will ensure the equal tax treatment of private sector employees and government employees, and represents a revenue increase of NOK 25 million accrued in 2008.
• One will introduce new tax rules for the determination of gross letting value for the taxation of free housing for retired farmers. The proposal implies a tax increase of NOK 20 million accrued in 2008.
• One will introduce an annual tax exempted amount for gifts subject to inheritance tax, corresponding to one-half the basic amount of the social security system. The exempted amount will replace the exemption under the Inheritance Tax Act for so-called occasional gifts, i.e. gifts for birthdays, Christmas, weddings, etc. The proposal represents a tax reduction of NOK 7 million accrued in 2008.
• Certain changes will be made to taxation on Svalbard as from 2008. The tax rate of the withholding tax scheme for wage income on Svalbard is to be reduced from 12 pct. to 8 pct. for incomes of less than 12 times the basic amount of the social security system, and to be increased to 22 pct. for any incomes in excess of the amount mentioned above. The special tax deduction of NOK 7,200 for tax years 2006 and 2007 will not be continued. Self employed persons on Svalbard shall no longer be required to calculate personal income, but net profits from their activities will be taxed as wage income. The tax rate on ordinary income is increased from 10 pct. to 16 pct., and the minimum allowance against ordinary income is increased from NOK 10,000 to NOK 20,000. These proposals are estimated to reduce revenues by NOK 3 million accrued in 2008.
• For taxpayers who are domiciled in EEA countries, one will introduce declining-balance depreciation for fixed assets that are temporarily located within Norwegian tax jurisdiction, instead of the current straight-line depreciation. This is of particular relevance to rigs and ships. The ESA has indicated that the current rules appear not to be in conformity with the provisions of the EEA Agreement on the freedom to provide services to customers in other EEA states. The proposal is estimated to imply a revenue loss of NOK 50 million accrued in 2008.
• Social security contributions on income from self-employment outside the primary sectors are to be increased by 0.3 percentage points, to 11 pct. The proposal is estimated to increase revenues by NOK 120 million accrued in 2008, and should be seen in the context of improved parental rights for the self-employed.
• The CO₂ tax on industries subject to mandatory quotas will be abolished. The proposal implies a tax reduction of NOK 90 million accrued in 2008.
• The CO₂ tax levied on the petroleum sector will be reduced to offset the estimated price of quotas. This will be booked as a change in the net cash flow from petroleum activities.
• One will introduce a low rate of the base tax on heating oil for the wood-processing industry. The Ministry assumes that this will become necessary, as a result of the state aid rules under the EEA Agreement, when the CO₂ tax on businesses subject to mandatory quotas is abolished. The proposal is estimated to increase revenues by NOK 20 million accrued in 2008.
• The tax on snuff and chewing tobacco will be increased by 10 pct. on top of price adjustments. The proposal will generate extra revenues of NOK 35 million accrued in 2008.
• One will implement changes to the Generalized System of Preferences (GSP) for the benefit of developing countries, which will imply a revenue loss of NOK 5 million accrued in 2008.
• The commercial letting of holiday homes will be subject to value added tax, at a rate of 8 pct. This proposal represents a tax reduction of NOK 15 million accrued in 2008.
• Commercial activities in Northern Troms and Finnmark, which have previously been exempted from electricity tax, will have to pay electricity tax at a reduced rate as from 1 January 2008 due to new EEA rules on minor state aid. The proposal represents a tax increase of NOK 4 million accrued in 2008.

 

Efforts to improve the tax system

The Government is working to improve the tax system in a number of important areas:

• The pension reform represents a significant restructuring of the pension system. The reform emphasises, inter alia, that it should be profitable to continue working, and that it should be easy to combine a pen­sion with work. This will require certain modifications to the current tax system for pensioners. Weight is attached to achieving these goals with acceptable revenue and distribution effects. One aims to have modified tax rules in place well ahead of 2010, when the new pension rules enter into force.
• The Standing Committee on Finance and Economic Affairs requested, in Recommendation No. 10 (2006–2007) to the Odelsting, Chapter 13, the Government to revert to the Storting with an assessment as to whether there are aspects of tax law where co-habitants should receive the same treatment as spouses. The Ministry of Finance is reviewing the regulatory framework to assess whether such equal treatment should be introduced. The Ministry will revert with suggestions as to the areas, if any, in which such equal treatment would be appropriate.
• The Government will change the inheritance tax with a view to making it fairer, and to increasing its legitimacy. One is now working to improve the statistics pertaining to inheritance tax. This will provide a better basis for considering changes to the inheritance tax.
• The tax reform aimed to put an end to the extensive tax planning under the split model. Under the split model, many people passed on as capital income what was, in fact, labour income, in order to pay less tax. The introduction of a dividend tax with a rate of return allowance has increased the tax on dividends paid to owners who are individuals. The Government prioritises the commissioning of independent studies as a basis for evaluating the tax reform. This will shed light on the question of whether the reform has worked as intended.

2. Effects on revenue of the proposed changes to direct and indirect taxes

Table 2 shows the estimated effects on revenue of the Government’s proposed changes to direct and indirect taxes for 2008.

The effects on revenue have been calculated on the basis of a reference system for 2008. The reference system for direct taxes is based on the 2007 rules, with all income limits adjusted to 2008 levels, assuming wage growth of 5 percent. A taxpayer with an annual wage growth of 5 per cent will then end up with the same average tax rate under the reference system for 2008 as in 2007. In the reference system for indirect taxes, all volume-based taxes have been adjusted by an estimated price increase from 2007 to 2008 of 2.6 per cent. Consequently, the indirect tax burden under the reference system is unchanged in real terms from 2007 to 2008.

Tables 3 and 4 offer an overview of important direct and indirect tax rates and thresholds included in the Government’s proposal relating to direct and indirect taxes for 2008. The tables also show direct and indirect tax rates and thresholds for 2007, as well as percentage changes from 2007 to 2008. The percentage increases in the general allowances and thresholds from 2007 to 2008 may deviate somewhat from the estimated wage growth as the result of rounding off.

Table 2 Estimated effects on proceeds from changes in direct and indirect taxes proposed for 2008. The estimates have been calculated relative to the reference system for 2008. Negative figures reflect tax reductions. NOK million

Accrued		Booked
The wealth tax	40	32
Abolish the discount applicable to equities and increase the minimum allowance by NOK 130,000 to NOK 350,000. Increase the assessed values for homes, holiday homes and other real estate, except agricultural properties and power plants, by 10 pct	0	0
Tighten the 80-percent rule	40	32
The income tax base for individuals	-95	-106
Tax any lodging allowance in excess of documented lodging expenses	100	80
Increase the allowance for labour union fees by NOK 450 to NOK 3,150.	-95	-95
Increase the supplement in the parent allowance for each child in excess of the first one from NOK 5,000 to NOK 15,000	-200	-160
Introduce tax on the letting of one’s own home for less than half of the tax year	55	44
Introduce new rules on the determination of gross letting value for the taxation
of the benefit from free housing for retired farmers	20	16
Introduce tax exemption for the employer’s payment of kindergarten expenses
in excess of the maximum price1	0	-11
Introduce tax on the benefit from free housing for government employees abroad.	25	20
Other changes in direct taxation	-308	158
Introduce a new tax-favoured pension scheme	-500	0
Keep costs associated with contribution based pension schemes outside the contribution limit.	-8	0
Introduce an annual tax-exempted amount for gifts subject to inheritance tax, corresponding to one-half of the basic amount of the social security system.	-7	-2
Increase the exemption limits applicable to employer’s social security contributions and the
duty to submit salary statements to the tax authorities for voluntary organisations.	-40	-30
Introduce an exemption from tax on wealth held by research foundations	-5	0
Changes to the Svalbard tax	-3	-14
Maintain nominal monetary limits and interactive effects.	255	204
The taxation of businesses2	92	369
Change the taxation of power plants3	38	280
Change the rules for calculating the minimum and maximum limits under the
the real estate tax for new power plants4	25	25
Introduce declining-balance depreciation for fixed assets that are temporarily within
Norwegian tax jurisdiction, and that belong to taxpayers domiciled in EEA countries	-50	0
Tax on capital gains from the sale of agricultural land to be classified as ordinary
income only if total annual gains are less than NOK 150,000	-10	0
Increase the lower limit of the agriculture allowance from NOK 45,000 to NOK 54,200. 5 Increase limits and rates of the special allowance against income from slate production to the same level as for the agriculture allowance.	-32	-26
Reduce the forestry factor applied when determining the assessed values of forests6	1	-5
Increase social security contributions on income from self-employment outside
the primary industries by 0.3 percentage points to 11 pct	120	95
Environmental and energy taxes	534	486
Abolish the CO2 tax on onshore industries subject to quotas (mandatory quotas to be introduced).	-90	-80
Increase the CO2 tax on mineral oil for use in domestic aviation by 10 øre per litre7	50	45
Reduce the CO2 tax on petroleum activities (mandatory quotas to be introduced)8.	0	0
Increase the rate of the base tax on heating oil to the same level as that of the electricity tax	550	500
Introduce a low rate of the base tax on heating oil for the wood-processing industry	20	18
Discontinue the use of minor state aid for commercial activities in the Northern Troms and Finnmark, which will thereby pay a reduced electricity tax from 1 January 2008	4	3
Motor vehicle taxes	-155	-190
Environmental differentiation of the annual tax on motor vehicles9	-590	-590
Change the rules governing tax-exempt reconstruction of damaged motor vehicles.	20	20
Increase the diesel tax by 20 øre per litre	415	380
Sectoral duties and overpriced government fees	-254	-254
Reduce the passport fee for adults from NOK 990 to NOK 450	-207	-207
Reduce the fees relating to the Brønnøysund Register Centre.	-50	-50
Reduce the fees relating to the Register of Certified Fishing Vessels.	-10	-10
Change the sectoral duty relating to the Financial Supervisory Authority of Norway. Contribution from the supervisory bodies	13	13
Other changes in indirect taxation	30	26
Increase the tax on snuff by 10 pct.	35	30
Change the GSP Scheme	-5	-4
The value added tax	-15	-13
Introduce a 8 pct. value added tax on the commercial letting of holiday homes	-15	-13
New changes to direct and indirect taxes for 2008	-131	508
Previous resolutions with revenue effects materialising in 2008	198	596
Resolutions in connection with the National Budget 2007 and
the Revised National Budget 2007	-18	380
Resolutions in connection with the National Budget 2006 and
the Revised National Budget 2006.	216	216
Overall effect on revenue in 2008 10	67	1104

1) It is proposed that this change be introduced with effect from 2007.
2) The proposed collection of two-thirds of the accrued tax liabilities of shipping companies is estimated to increase booked revenue by NOK 1.4 billion each year for ten years as from 2008.
3) Changes to the special tax systems, hereunder changes to the economic rent tax for power plants, fall outside the scope of the tax pledge. It is proposed that permitting the consolidation of new negative economic rent income, abolishing the risk supplement applicable to interest, as well as increasing the economic rent tax be introduced with effect from 2007. It is proposed that reducing the exemption limit, etc., be introduced with effect from 2008.
4) Changes relating to the real estate tax fall outside the scope of the tax pledge.
5 The reduction represents full compensation for the agricultural sector for the increase in the base tax on heating oil compared to a continuation of the current lower limit of NOK 45,000.
6) The forestry factor is reduced from 8 to 4 for the tax year 2007, and increased to 5 from 2008. The proposal is estimated to reduce revenues by NOK 6 million accrued in 2007.
7) Net revenue effect. This includes increased appropriations over the Fiscal Budget in the amount of NOK 5 million in connection with the renegotiation of the Aviation Agreement.
8) Revenues from the petroleum sector are not included in the table because these are channelled to the Government Pension Fund – Global. The restructuring of the CO2 tax on petroleum activities reduces the cash flow in 2008 by NOK 1980 million accrued and NOK 990 million booked. This is outweighed by revenues from the sale of quotas, with the overall climate cost to the industry remaining more or less unchanged.
9) Net revenue effect. This includes increased appropriations for a higher vehicle scrap deposit refund in the amount of NOK 50 million.
10) The tax pledge was met upon the presentation of the National Budget 2007. The overall accrued revenue effect in 2008 is NOK 4 million when the accrued effect of changes to the economic rent tax for power plants (special tax) and to the real estate tax (voluntary, municipal tax) for power plants (NOK 63 million) is kept outside the tax pledge. When taking into consideration the overall net accrued revenue effect in 2007 resulting from resolutions and proposals after the presentation of the 2007 Budget (NOK-58 million), the tax level remains more or less unchanged from 2007 to 2008 (NOK -54million).
Source: Ministry of Finance.

 

 

Table 3 Direct tax rates and thresholds, etc. for 2007 and proposals for 2008

	2007-rules	2008-rules	Changes from 2007 to 2008
Tax rate on ordinary income
Individuals1	28.0 pct.	28.0 pct.	-
Businesses	28.0 pct.	28.0 pct.	-
Surtax
Bracket 1
Lower threshold	NOK 400 000	NOK 420 000	5 pct.
Rate2	9.0 pct.	9.0 pct.	-
Bracket 2
Lower threshold	NOK 650 000	NOK 682 500	5 pct.
Rate	12.0 pct.	12.0 pct.	-
Social security contribution
Lower threshold for the payment of social security contribution	NOK 39 600	NOK 39 600	-
Levelling rate	25.0 pct.	25.0 pct.	-
Rate
Wage income	7.8 pct.	7.8 pct.	-
Income from self-employment within agriculture, forestry and fisheries	7.8 pct.	7.8 pct.	-
Other income from self-employment	10.7 pct.	11,0 pct.	0.3 pct.points
Pension income etc	3.0 pct.	3.0 pct.	-
Employer’s social security contribution
Zone I	14.1 pct.	14.1 pct.	-
Zone Ia3	14.1 pct.	14.1 pct.	-
Zone II	10.6 pct.	10.6 pct.	-
Zone III	6.4 pct.	6.4 pct.	-
Zone IV	5.1 pct.	5.1 pct.	-
Zone IVa	7.9 pct.	7.9 pct.	-
Zone V	0.0 pct.	0.0 pct.	-
Maximum effective marginal tax rates
Wage income excl. employer’s social security contribution	47.8 pct.	47.8 pct.	-
Wage income incl. employer’s social security contribution	54.3 pct.	54.3 pct.	-
Pension income	43.0 pct.	43.0 pct.	-
Income from self-employment within agriculture, forestry and fisheries	47.8 pct.	47.8 pct.	-
Other income from self-employment	50.7 pct.	51.0 pct.	0.3 pct.points
Dividends and distributions4	48.2 pct.	48.2 pct.	-
Personal allowance
Class 1	NOK 37 000	NOK 38 850	5 pct.
Class 25	NOK 74 000	NOK 77 700	5 pct.
Basic allowance in wage income
Rate	36.0 pct.	36.0 pct.	-
Lower threshold	NOK 4 000	NOK 4 000	-
Upper threshold6	NOK 63 800	NOK 67 000	5 pct.
Basic allowance in pension income
Rate	26.0 pct.	26.0 pct.	2.0 pct.points
Lower threshold	NOK 4 000	NOK 4 000
Upper threshold	NOK 53 400	NOK 56 100	5.1 pct.
Special wage income allowance7	NOK 31 800	NOK 31 800	-
Special allowance relating to old age and disability, etc	NOK 19 368	NOK 19 368	-
The tax limitation rule for retired persons, etc8
Levelling rate	55.0 pct.	55.0 pct.	-
Tax-free net income
Single	NOK 99 600	NOK 104 600	5 pct.
Married couple	NOK 163 300	NOK 171 500	5 pct.
Net wealth surcharge
Rate	1,5 pct.	1.5 pct.	-
Limit	NOK 200 000	NOK 200 000	-
Special allowance for tax payers in Finnmark and Northern Troms
Class 1	NOK 15 000	NOK 15 000	-
Class 2	NOK 30 000	NOK 30 000	-
Fishermen’s and seamen’s allowance
Rate	30.0 pct.	30.0 pct.	-
Upper threshold	NOK 80 000	NOK 80 000	-
Special allowance for self-employed within agriculture etc
Income-independent allowance	NOK 45 000	NOK 54 200	20.4 pct.
Allowance rate above income-independent allowance	32.0 pct.	32.0 pct.	-
Maximum overall allowance	NOK 142 000	NOK 142 000	-
Special allowance for high expenses related to sickness
Lower threshold	NOK 9 180	NOK 9 180	-
Maximum allowance for premium paid to individual pension schemes	abolished	NOK 15 000	New
Allowance for travel between home and workplace
Rate per kilometre	NOK 1.40	NOK 1.40	-
Lower threshold	NOK 12 800	NOK 12 800	-
Maximum allowance for gifts to voluntary organisations, etc	NOK 12 000	NOK 12 000	-
Maximum allowance for labour union fees etc	NOK 2 700	NOK 3 150	16.7 pct.
Tax credits for home savings for people under the age of 34 (BSU)
Rate of tax credit	20.0 pct.	20.0 pct.	-
Maximum annual savings	NOK 15000	NOK 15000	-
Maximum savings under the scheme	NOK 100 000	NOK 100 000	-
Parent allowance for documented costs associated with childcare
Upper threshold
One child	NOK 25 000	NOK 25 000	-
Additional amount for each subsequent child	NOK 5 000	NOK 15 000	200 pct.
Wealth tax9
Local government
Lower threshold	NOK 220 000	NOK 350 000	59.1 pct.
Rate	0.7 pct.	0.7 pct.	-
Central government
Bracket 1
Lower threshold	NOK 220 000	NOK 350 000	59.1 pct.
Rate	0.2 pct.	0.2 pct.	-
Bracket 2
Lower threshold	NOK 540 000	NOK 540 000	-
Rate	0.4 pct.	0.4 pct.	-
Wage allowance under the rate of return allowance method for sole proprietorships	15.0 pct.	15.0 pct.	-
Discount applicable to equities	15.0 pct.	abolished	-15.0 pct.points
Depreciation rates
Group a (office equipment etc.)	30 pct.	30 pct.
Group b (acquired goodwill)	20 pct.	20 pct.
Group c (lorries, trucks, buses, vans etc.)	20 pct.	20 pct.
Group d (passenger cars, machinery, furniture and fixtures etc.)	20 pct.	20 pct.
Group e (ships, vessels, rigs etc.)	14 pct.	14 pct.
Group f (aircrafts)	12 pct.	12 pct.
Group g (structures for transmission and distribution of electric power and electro-technical equipment in hydroelectric power plants)	5 pct.	5 pct.
Group h (constructions and buildings, hotels etc.)10	4 (8) pct.	4 (8) pct.
Group i (commercial buildings)	2 pct.	2 pct.

1) The tax rate for Northern Troms and Finnmark is 24.5 pct.
2) The tax rate for Northern Troms and Finnmark is 7 pct. in bracket 1.
3) Zone Ia shall continue to pay employer’s social security contributions at a rate of 10.6 pct. until the difference between what the firm actually pays and what the firm would have paid at a rate of 14.1 pct. equals the de minimis state aid threshold. The threshold for 2008 is NOK 530,000 per firm. For road haulage firms the threshold is NOK 265,000.
4) Included corporate income tax (28 pct.)
5) Class 2 is applicable to single parents and taxpayers who provide for their spouse.
6) Maximum basic allowance for the sum of wage and pension income is limited upwards to the maximum basic allowance in wage income, i.e. NOK 67,000 in 2008.
7) Taxpayers will benefit from the largest of the basic allowance in wage income and the special wage income allowance.
8) The tax limitation rule also applies to single parents who receive transitional benefit.
9) The thresholds are valid for single tax payers. The thresholds for married spouses, who are jointly taxed for common wealth, are doubled compared to amounts given in the table.
10) Buildings of simple construction that are assumed to have a commercial service life of less than 20 years may be depreciated at a rate of 8 pct.

 

 

Table 4 Indirect tax rates for 2007 and proposed rates for 2008

Category of indirect tax	Current rate	Proposal 2008	Percentage change
Value added tax, per cent of sales value 1
Ordinary rate	25	25	-
Reduced rate	14	14	-
Low rate	8	8	-
Tax on alcoholic beverages
Spirit-based beverages in excess of 0.7 pct. alcohol by volume,
NOK/pct. alcohol and litre	5.74	5.89	2.6
Other alcoholic beverages from 4.7 to 22 pct. alcohol by volume,
NOK/pct. alcohol and litre	3.74	3.84	2.7
Other alcoholic beverages up to 4.7 pct. alcohol by volume, NOK/litre
a) 0.0-0.7 pct. alcohol by volume	1.64	1.68	2.4
b) 0.7-2.7 pct. alcohol by volume	2.56	2.63	2.7
c) 2.7-3.7 pct. alcohol by volume	9.68	9.93	2.6
d) 3.7-4.7 pct. alcohol by volume	16.76	17.20	2.6
Tax on tobacco goods
Cigars, NOK/100 grams	187	192	2.7
Cigarettes, NOK/100 units	187	192	2.7
Smoking tobacco, NOK/100 grams	187	192	2.7
Snuff, NOK/100 grams	60	68	13.3
Chewing tobacco, NOK/100 grams	60	68	13.3
Cigarette paper, NOK/100 units	2.86	2.93	2.4
Motor vehicle registration tax
Passenger cars, etc. Tax category a2
Weight tax, NOK/kg
initial 1150 kg	33.16	34.02	2.6
next 250 kg	72.27	74.15	2.6
next 100 kg	144.55	148.31	2.6
remainder	168.11	172.48	2.6
Motor effect tax, NOK/kW
initial 65 kW	120.59	123.73	2.6
next 25 kW	502.47	515.53	2.6
next 40 kW	1 205.92	1237.27	2.6
remainder	2 512.33	2 577.65	2.6
CO2-emissions, grams/km
initial 120 grams	40.20	41.25	2.6
next 20 grams	190.94	195.90	2.6
next 40 grams	502.47	515.53	2.6
remainder	1 406.90	1443.48	2.6
Delivery vans class 2. Tax category b,3
pct. of passenger car tax	22	22	-
Camper vans. Tax category c,4
pct. of passenger car tax	22	22	-
Weasels. Tax category e, pct. of value	36	36	-
Motor cycles. Tax category f, unit tax	9 558	9 807	2.6
Piston displacement tax, NOK/cm3
initial 125 cm3	0	0	-
next 775 cm3	32.83	33.68	2.6
remainder	71.99	73.86	2.6
Motor effect tax, NOK/kW
initial 11 kW	0	0	-
remainder	425.36	436.42	2.6
Snow scooters. Tax category g
Weight tax, NOK/kg
initial 100 kg	13.47	13.82	2.6
next 100 kg	26.95	27.65	2.6
remainder	53.87	55.27	2.6
Piston displacement tax, NOK/cm3
initial 200 cm3	2.82	2.89	2.5
next 200 cm3	5.61	5.76	2.7
remainder	11.22	11.51	2.6
Motor effect tax, NOK/kW
initial 20 kW	35.93	36.86	2.6
next 20 kW	71.82	73.69	2.6
remainder	143.65	147.38	2.6
Taxis. Tax category h,5 pct. of passenger car tax	40	40	-
Vintage cars. Tax category i, NOK	3 147	3 229	2.6
Mini buses, Tax category j,6 pct. of passenger car tax	40	40	-
Annual tax on motor vehicles, NOK/year
Ordinary rate
Diesel vehicles	2 915	3 090	6.0
Petrol vehicles and diesel vehicles with factory installed particle filter	2 915	2 660	-8.7
Motor cycles	1 645	1 690	2.7
Caravans	970	995	2.6
Tractors, mopeds, etc.	370	380	2.7
Annual weight-based tax, NOK/year	varies	varies	2.6
Re-registration tax	varies	varies	2.6
Petrol tax, NOK/litre
Sulphur-free 7	4.17	4.28	2.6
Low-sulphur 8	4.21	4.32	2.6
Auto diesel tax, NOK/litre
Sulphur-free 9	3.02	3.30	9.3
Low-sulphur 10	3.07	3.35	9.1
Marine engine tax, NOK/HP	140.00	143.50	2.5
Electricity consumption tax, øre/kWh
General rate	10.23	10.50	2.6
Reduced rate	0.45	0.45	-
Lubricating oil tax, NOK/litre	1.68	1.72	2.4
Tax on mineral products
Base-tax on heating oil
Mineral oil, NOK/litre	0.429	0.845	97.0
Mineral oil used in wood-processing industry, NOK/litre	-	0.120	-
CO2 tax
Petroleum activities, NOK/litre or Sm3	0.80	0.45	-43.8
Mineral oil, NOK/litre	0.54	0.55	1.9
Mineral oil in domestic aviation, NOK/litre	0.54	0.65	20.4
Mineral oil in the wood-processing, herring meal and fish meal industries, NOK/litre	0.27	0.28	3.7
Petrol, NOK/litre	0.80	0.82	2.5
Natural gas, NOK/Sm3	0.47	0.48	2.1
LPG, NOK/kg	0.60	0.62	3.3
Sulphur tax, NOK/litre	0.070	0.072	2.9
Tax on the final treatment of waste
Landfills for waste disposal, NOK/tonne
Landfills – high environmental standard	423	434	2.6
Landfills – low environmental standard	552	566	2.5
Incineration plants, NOK/emission unit	varies	varies	2.6
CO2 tax on waste to be incinerated , NOK/tonne	59.00	60.53	2.6
Tax on health- and environmentally damaging chemicals
Trichloreten, NOK/kg	57.69	59.19	2.6
Tetrachloreten, NOK/kg	57.69	59.19	2.6
Tax on greenhouse gases HFC and PFC
NOK/tonne CO2-equivalents	193.98	199.02	2.6
Tax on emissions of NOx, NOK/kg	15.00	15.39	2.6
Tax on chocolate, etc., NOK/kg	16.36	16.79	2.6
Tax on non-alcoholic beverages
Finished product, NOK/litre	1.64	1.68	2.4
Concentrate (syrup), NOK/litre	9.99	10.25	2.6
Tax on beverage packaging, NOK/unit
Environmental tax
a) Glass and metals	4.62	4.74	2.6
b) Plastics	2.79	2.86	2.5
c) Carton and cardboard	1.15	1.18	2.6
Base-tax on disposable packaging	0.95	0.97	2.1
Sugar tax, NOK/kg	6.34	6.50	2.5
Stamp duty, per cent of sales value	2.5	2.5	-

1) Change in Value Added Tax is stated in percentage points.
2) Group a: Passenger cars, delivery vans class 1 and buses less than 6 meters in length, with up to 17 seats. For vehicles with no specification as to CO2 emissions, piston displacement will be retained as a factor in determining the amount of tax.
3) Group b: Delivery vans class 2. Change stated in percentage points.
4) Group c: Campervans. Change stated in percentage points.
5) Group h: Taxi and transportation of disabled people. Change stated in percentage points.
6) Group j: Buses less than 6 meters in length, with up to 17 seats, of which at least 10 are forward-facing. Change stated in percentage points.
7) Petrol with a sulphur content of 10 ppm or less.
8) Petrol with a sulphur content between 10 ppm and 50 ppm.
9) Auto diesel with a sulphur content of 10 ppm or less.
10) Auto diesel with a sulphur content between 10 ppm and 50 ppm.
Source: Ministry of Finance.

 

 

3. Allocation of public sector revenue from direct and indirect taxes

Table 5 offers an overall overview of the main categories of direct and indirect taxes, and the parts of the public sector to which the revenue from each of the main categories accrue. Overall revenue from direct and indirect taxes is estimated at about NOK 962 billion for 2007, of which about 87 percent accrues to central government, 11 percent to local government and 2 percent to regional government.

The main part of the tax revenue accruing to local and regional government is in the form of income and wealth tax paid by taxpayers who are individuals. About 33 percent of central government revenue originates from value added tax, excise duties and customs duties. About 22 percent originates from taxpayers who are individuals, whilst about 19 percent is in the form of income and wealth tax from those who pay their taxes in arrears, together with employer’s social security contributions from Mainland Norway. About 23 percent of 2007 central government revenue is in the form of direct and indirect taxes from the petroleum sector. Other direct and indirect taxes account for about 3 percent.

Table 5 Accrued direct and indirect taxes allocated by tax creditors.¹ 2007 estimates. NOK billion

	Central government	Local government	Regional government	In total
Individual taxpayers	185,6	96,0	19,6	301,3
Tax on ordinary income	94,0	88,8	19,6	202,4
Surtax	13,9	-	-	13,9
Social security contribution	74,4	-	-	74,4
Wealth tax	3,4	7,2	-	10,6
Businesses (which pay their taxes in arrears)	51,2	1,3	0,2	52,7
Income tax 2	51,0	1,3	0,2	52,5
Wealth tax	0,2	-	-	0,2
Property tax	-	5,1	-	5,1
Employer’s social security contribution	110,2	-	-	110,2
Indirect taxes	277,9	-	-	277,9
Value added tax and investment tax	185,7	-	-	185,7
Excise duties and customs duties	92,2	-	-	92,2
Petroleum	193,6	-	-	193,6
Tax on income	187,2	-	-	187,2
Tax on extraction, etc	6,4	-	-	6,4
Other direct and indirect taxes	21,0	0,9	-	21,9
Social security and pension premiums, other central government and social security accounts 3	18,1	-	-	18,1
Tax on dividends for foreign shareholders	2,1	-	-	2,1
Other direct and indirect taxes 4	0,9	0,9	-	1,8
Total direct and indirect taxes	839,5	103,3	19,8	962,7
Of which direct taxes	561,7	103,3	19,8	684,8

1) Overall figures are in accordance with the definitions applied in the National Accounts, but the classification into tax types deviates somewhat therefrom.
2) Including tax on shipowning companies encompassed by the taxation scheme for shipowning companies, and power stations.
3) Including, inter alia, the Norwegian Public Service Pension Fund.
4) Including certain revenue items classified as tax revenue in the National Accounts, but not entered as tax revenue in the Fiscal Budget.
Source: Ministry of Finance.