According to the proposal, the Government will also allocate nearly NOK 675 million to cover extraordinary expenses in connection with the July 22nd terrorist attacks.
In his speech, the Finance Minister said the Norwegian economy is performing well, with low unemployment and growth in the mainland economy along the long term trend.low interest rates and further increase in petroleum investments suggest growth in mainland activity approximately on par with the historical average in the year ahead. Mainland GDP is forecast to grow by 2.8 per cent in 2011 and by 3.1 per cent in 2012. Unemployment is expected to remain stable at 3¼ per cent.
Johnsen said the Norwegian economy might be adversely affected by weaker international growth and the unrest in international financial markets. However, the economic policy guidelines lay a sound foundation for a stable development of the economy. The Government remains firmly committed to the guidelines and propose a budget for 2012 with a structural, non-oil deficit slightly below expected real return on the Government Pension Fund Global.
Here are some of the main features of fiscal policy in 2012:
The spending of petroleum revenues, as measured by the structural, non-oil budget deficit, is estimated at NOK 122.2 billion, which is NOK 2.4 billion below the expected real return on the Government Pension Fund Global.
An increase in the structural non-oil deficit from 2011 to 2012 corresponding to ¼ per cent of Mainland trend-GDP. The overall impact of the fiscal budget on Mainland GDP is estimated to be broadly neutral.
The real underlying growth in Fiscal Budget expenditures from 2011 to 2012 is estimated at 2.1 per cent, somewhat below the average of the previous ten years.
A non-oil fiscal budget deficit estimated at NOK 120.2 billion. The deficit is covered by a transfer from the Government Pension Fund Global.
A central government net cash flow from petroleum activities of about NOK 352 billion.
A consolidated surplus in the Fiscal Budget and the Government Pension Fund, including interest and dividends, of about NOK 346 billion.
An estimated market value of Government Pension Fund of NOK 3 685 billion at the end of 2012. The old age pension liability under the National Insurance Scheme, is estimated at NOK 5178 billion at the end of 2012.
An unchanged level of taxation.
The overall level of taxation is kept unchanged from 2011 to 2012. This is in accordance with the Government’s commitment from 2005 of keeping total accrued taxes at the 2004 level. The evaluation of the tax reform of 2006 shows that the reform was successful and that the Norwegian tax system is generally well functioning, see Report No. 11 (2010-2011) to the Storting. Still, the evaluation demonstrates that there is room for improvement, particularly to prevent tax avoidance and to simplify the rules. In the 2012 budget, the Government follows up the evaluation by proposing some changes in corporate taxation.
No major changes are proposed for personal income tax. The rate structure of wage taxation and the tax rate on share income are to be continued, in line with the principle of the 2006 tax reform that the differences between the highest marginal tax on share income and wage income should not be too large.
The Government proposes a raise in the VAT rate on foodstuffs from 14 to 15 per cent.
To contribute to greater predictability of future fuel taxes, the Government announces a change to a more general road usage tax on all kinds of fuels. By 2020, road use taxes are to be levied on all fuels according to the energy content of the fuel. The existing exceptions from the road use taxes are to be evaluated in 2015. The Government has no plans to change the road use taxes for alternative fuels before the evaluation in 2015.
The budget proposal points out that Norway's Mainland GDP growth has now been positive for seven consecutive quarters, fuelled by private and public consumption. Growth in consumption tapered off in the first half of 2011, but gross fixed investment both in the housing and petroleum sector has underpinned growth in the economy. High income growth, low interest rates and higher petroleum investments suggest continued high activity in the Norwegian economy. Mainland GDP is now forecast to grow by 2.8 per cent in 2011 and 3.1 per cent in 2012, which is on par with or slightly above the historical average.
The labour market regained momentum in the second half of 2010 and the unemployment rate is expected to remain stable at 3¼ per cent in 2011 and 2012, according to the budget proposal.