Growth in production and employment in the mainland economy has picked up well since the financial crisis started. Unemployment is low in historical terms as well as in comparison with other countries. The mainland economy is fuelled by a strong growth in demand from the petroleum sector.
– The Norwegian economy does well. However, we cannot assume that the good times will last. In good times it is easy to make mistakes that lead to a slowdown later on. Several years of strong growth in wage costs and a gradual stronger krone exchange rate has increased the Norwegian cost level. The export industries have become more vulnerable faced with the international economic slowdown, says Jens Stoltenberg.
– The main issue for the Government is sound economic policies. To stimulate business investments in the mainland economy and contribute to a more balanced development of the economy is the objective behind the proposals. Unions and employers have contributed towards a balanced development with a moderate wage settlement this year. The government tax proposals are fully financed. The total tax level for the mainland economy is thus unchanged. This is in accordance with the Government promise not to change the tax level, says Finance Minister Sigbjørn Johnsen.
The corporate tax rate will be lowered from 28 per cent to 27 per cent. The self-employed will get a similar reduction in the taxation of self-employed income. The total revenue cost is estimated to about NOK 3 billion.
At the same time we want to reduce tax loop holes and unwanted tax avoidance. The Ministry of Finance has therefore issued a public consultation on limiting tax deductions for interest expenses to related parties. The resulting increase in tax revenue is estimated to approximately NOK 3 billion.
As a part of the growth package the Government will also introduce a special first year additional depreciation allowance of 10 per cent of cost for investments machinery, cars, equipment etc. This means that these assets can be written off by 30 per cent in the year of purchase. This will reduce tax revenue with approximately NOK 400 million.
The Government will strengthen the Skattefunn scheme with NOK 100 million with the aim to further stimulate business R&D spending and strengthen R&D institutions.
Furthermore, the Government proposes to reduce tax lenient valuation of business property and on non-owner occupied housing. The proposal will help to channel more capital towards business investments as well as contribute to moderate the housing price growth. The changes will increase tax revenue by about NOK 500 million.
The tax proposals for mainland businesses are backed up by a proposed improvement to the petroleum tax system effective from today.
– An effect of the bill is that the oil companies will cover a larger share of the investment costs as less will be covered through tax deductions. A larger share of the risk of cost overruns will be carried by the companies. This will give rise to more cost awareness. Furthermore, it may ease the signs of pressure in the economy and moderate the cost increases that a high activity level in the petroleum sector contributes to, says Sigbjørn Johnsen.