The former government, Stoltenberg II, increased the tax level, whereas this Government decides to reduce taxes. The Government is giving priority to tax cuts promoting economic growth and contributing to long-term securement of the welfare system. Overall, the tax relief amounts to NOK 8 billion accrued and NOK 4.8 billion booked in 2014.
Tax on net income
The Stoltenberg II Government proposed a reduction in the tax rate on net income for corporations from 28 pct. to 27 pct. The tax rate on net income for personal taxpayers was maintained at 28 pct. Differences in these tax rates encourage tax planning and should be avoided. The Government is thus proposing to reduce the tax rate on net income to 27 pct. for personal taxpayers as well as for corporations. This will effectively reduce the general tax level in Norway. It also implies that the former Government’s poorly targeted and complicated tax relief proposals regarding the self- employed can be withdrawn.
Tax on net wealth
The Government is proposing a reduction in the tax rate on net wealth by 0.1 percentage point, to 1 pct. Reductions in the tax rate on wealth encourage savings and will in combination with a lower tax rate on ordinary income promote economic growth.
In the longer term part of the immediate revenue loss, roughly estimated to 10 – 30 pct., will thus be restored.
The Stoltenberg II Government’s proposals with regard to base broadening and the increase in the basic allowance in the net wealth tax to NOK 1 million are maintained.
The inheritance tax is abolished. This facilitates the transfer of family businesses, dwellings and holiday homes from one generation to another. It also implies a significant simplification for taxpayers. The administrative burden for the Norwegian Tax Administration will be reduced. The inheritance tax bases, which are also used as a base for the capital gains tax, will be replaced by new tax bases. These will in most cases equal the deceased’s or donor’s entry values. However, if the deceased could have sold his dwelling, holiday home or farm free of tax, the recipient is also granted a capital gains tax exemption at the inheritance settlement. In the case that the recipient does not sell the property, any capital gains tax is only due on the gains earned while the property is kept by the recipient.
Limitation of deductions for interest expenses to related parties
The Government maintains the main features of the former government’s proposal on new rules limiting tax deductions in the corporate tax base for interest expenses to related parties. According to the proposal, deductions for intra-group interest expenses will be disallowed if total net interest expenses exceed 30 pct. of an adjusted taxable income. Only net intra-group interest expenses will be disallowed. However, interest paid to unrelated lenders is included when calculating the interest deduction limit.
The Government adjusts the proposal somewhat, proposing to increase the threshold for the limitation to be applicable from interest expenses of NOK 3 million to NOK 5 million.
Initial depreciation rules
The Government also maintains the former Government’s proposal regarding the introduction of 10 pct. initial depreciation for machinery and other operating equipment in asset group d. The Government will also initiate an evaluation of the depreciation rules and how they relate to real value loss on operating equipment.
Tax incentive scheme for R&D (Skattefunn)
The Government’s proposal includes a further expansion of the Skattefunn R&D tax incentive scheme relative to the former government’s proposal. The cap on internal R&D is increased from NOK 5.5 million to NOK 8 million. The overall cap on internal and outsourced R&D is maintained at NOK 22 million as with the former government’s proposal. The 2014 amendments imply a broad extension of the Skattefunn R&D tax incentive scheme that will benefit all users of the scheme.
Other tax changes
The Government is proposing some other tax changes, inter alia:
The social security contributions will be increased by 0.4 percentage points. This increase must be seen in connection with the reduced tax rate on net income. The special tax credit for pension income is adjusted to the other tax changes in such a manner that the minimum pension remains tax free.
In line with the Government’s political platform the home investment savings scheme for people below the age of 34 years (BSU) is expanded. The scheme is aimed at helping young people buying a home. The Government is proposing to increase the maximum annual deposit entitling a tax credit to NOK 25 000. The overall ceiling for tax credit entitling deposits is increased to NOK 200 000.
The Government maintains the proposed reduction in judicial registration fees on real estate, mortgage bonds etc. as well as in other sectoral taxes and overpriced fees. The price to the public should not exceed the government’s cost of providing these services.
The Government maintains the former government’s proposals on increased tax on greenhouse gases.
The Government cancels the former government’s proposed increase in the electricity tax.
Estimated revenue effects of the tax programme for 2014. Negative figures represent tax reductions. The estimates have been calculated relative to a benchmark system for 2014. NOK million