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Norway

11 November 2021

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Norway Announces Amendments to the 2022 Fiscal Budget Proposal

The Norwegian government issued a release on Amendments to the 2022 Fiscal Budget Proposal on 8 November 2021.

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Amendment to the 2022 Fiscal Budget Proposal: A new and fairer course for the whole of Norway

Opportunities throughout the country, higher employment, labour market security, a fairer distribution of income and wealth and fairer climate policies are key priorities in the new government's proposed changes to the 2022 budget.

"With this budget ordinary people will notice that we set at new course for Norway. Taxes will be reduced, and we take measures to improve everyday life for low- and middle-income groups throughout the country. We are pointing out a new and fairer course for the whole country, " says Minister of Finance Trygve Slagsvold Vedum (Centre Party).

The budget proposal marks a new course for tax policy. Those with high incomes and high net wealth will contribute more, while take-home pay will increase for those with annual earnings below NOK 750 000. The government proposes to reduce indirect taxes by NOK 2.3 billion compared with the Solberg government.

"We rely on income from taxes to provide people with high quality services throughout the country, but it is time for costs to be distributed more fairly. The wealthy should take more responsibility, while life should be made easier for ordinary people. The tax levied on electric power supply will be reduced, deductions for commuters will be increased, ferry prices will be lowered as will the maximum price for child care programs. We have also increased the wealth tax, the tax on dividends and the bracket tax for the highest earners," says the Minister of Finance.

With an increase of NOK 2.5 billion in municipalities' non-earmarked revenues, the government will help provide even better services for people throughout Norway. The increase comes in addition to the increase of NOK 2 billion that the previous government added in its budget proposal for 2022. Municipalities with be compensated with an additional NOK 300 million for their most resource-demanding health and care services. Increased funding for hospitals, police and child welfare will improve security and local public services.

"Municipal finances are about the local school, the nursing home and basic services. With this initiative, we will strengthen local welfare, but also provide greater space for decisions to be made locally. Communities are best built at the local level and we intend to give people more influence over their own lives," says the Minister of Finance.

Unemployment has returned to low levels, but there are still many who have been unemployed for a long time. Young people are struggling to enter the labour market. The government will contribute to employment through increased spending on labour market measures that qualify for working-life.

In addition, the government proposes measures to support a more secure and adaptable working life, including through a higher deduction for trade union membership fees and increased funding for the Norwegian Labour Inspection Authority, the Norwegian Tax Administration and the Norwegian Labour and Welfare Administration.

Climate change must be met with offensive and fair policies. The government is in favour of a gradual escalation of taxes on CO2 emissions that are not part of the European Union Emissions Trading System to about NOK 2,000 per metric ton in 2030. Motorists will be shielded from large parts of the tax increase through reductions in motor insurance tax and road tax. Incentives to choose biofuels will be strengthened. The government's proposals entail a reduction in the pump price of NOK 0.31 for diesel and NOK 0.28 for petrol compared with the Solberg government's proposal.

The government will further develop Norway as a world-leading and sustainable industrial nation and proposes significant allocations for climate measures and a green transition in the budget, including to Enova and Innovation Norway. The government also proposes to increase development aid related to climate change and aims to double Norway's climate funding by 2026.

The outlook indicates high activity in the coming years. The proposed amendments to the budget entail a structural non-oil deficit of NOK 322.4 billion in 2022, unchanged from the proposal by the previous government. It corresponds to 2.6 per cent of the estimated capital in the Government Pension Fund Global at the beginning of 2022, down from 3.6 per cent this year.

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