New Economic Survey on Norway

March 9, 2010 Taxation in Norway

Government buildingsThe Organization for Economic Co-operation and Development (OECD) has released the Economic Survey of Norway 2010, which assesses the current economic position of the nation and potential courses of action to follow through the remnants of the global recession.

According to newly published report released March 8th, Norway had experienced a relatively mild contraction during the economic crisis. National unemployment is expected to peak at no more than 4 percent. The OECD projections claim that economic growth will remain strong in 2010 and improve further in 2011.

Norway’s current economic position has been attributed to the Government’s ability to implement significant budgetary stimulus measures and cutting the central bank interest rates by 450 basis points. Initiatives were also introduced to insure the maintained liquidity of funds for Norwegian banks, despite their heavy reliance on international finance.

To maintain Norway’s current positive standing, the OECD has suggested that a number of the policies legislated during the worldwide recession be retracted, in order to ensure that the economy doesn’t “overheat” in coming years. The primary recommendation for Norway was to withdraw the fiscal stimulus measures originally outlined within the 2010 Budget. The monetary stimulus, which amounted to 0.6 percent of GDP, is considered to be excessive by the OECD, in the light of Norway’s current standing.

The report strictly stated that Norway’s already high levels of personnel taxation should not be raised, and strong encouragement was given to reduce top marginal rates. Further, the OECD reported that the Government’s current treatment of housing taxation is economically unjustifiable and reforms should be led to phase out the current deductibility on interest paid for owner-occupied dwellings, and the discount given to housing in regards to the wealth tax. According to the report, increases to housing taxation would be adequate to balance reduced top marginal rates.

According to the report Norway needs to return to the 4 percent path of Government spending, which stated that the structural non-oil Government deficit should be no more than 4 percent of the Government Pension Global Fund (GPGF). The GPFG was implemented in 2001 for the long-term management of surplus revenues made from petroleum production within the country, and according to the OECD has had major positive effects on public finances and the economy.

Commenting on the report Sigbjørn Johnsen, Fiancne Minister of Norway, said; “OECD’s assessment of the Norwegian economy serves to stimulate the debate on important economic policy issues. We appreciate OECD’s assessment that our macroeconomic framework is serving us well.”

Photo by Peter Nijenhuis