Business and taxes in budget crossfire

The Labour Party government and a coalition of centrist parties were struggling to patch together a budget compromise, but questions of taxation and international business competitiveness were holding the two sides apart.

The thorniest issue has been the government's proposal to levy a new tax of 14 percent on stock dividends - a measure that critics said would discourage capital investment. In a humbling effort to retain power, the government appeared to have retracted its proposal for an extraordinary "business cycle" tax, which would have increased payroll taxes during periods of strong economic expansion, and to have accepted centrist calls for a 50-percent cut in the value-added tax on food. Earlier, some 45 industrial leaders had petitioned the Parliament to remove the existing special tax on industrial power usage, reduce the special tax on carbon dioxide emissions and drop the "business cycle" tax proposal. Without tax relief, they said, Norwegian industrial competitiveness could begin to decline.