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In December 2019, the Bø municipality in Vesterålen decided to cut the municipal estate tax. It was an attempt to get rich Norwegians to move into the municipality.
But what risk did they take?
They themselves did not know.
– Like the rabbit in the hat
The municipality ran the risk of having to cover its own loss of income as a result of the tax cut and, at the same time, cover the community’s tax loss when wealthy Norwegians moved to Bø.
However, when the Bø municipal council approved the tax cut a year ago, it was on a reasonably small basis, states Sv policy Anette Korneliussen.
– It wasn’t on the agenda. It was as if the rabbit took its hat off, says Korneliussen.
She is the leader of the local party team and a member of the municipal council.
“In an unsympathetic way”
His party was the only one protesting against Conservative Mayor Sture Pedersen’s proposal.
– We were not presented with any figures or studies, apart from Sture’s vision that he spoke about in a very warm and positive way, says Korneliussen.
While the Deputy Leader of the Labor Party, Bjørnar Skjæran, has strongly criticized Bø, his party colleagues in the municipality chose to vote. for the tax cut.
– Here the prospects of getting it right were so great that we decided to go for this, even though there was a high degree of play, says Tom Tobiassen of the Bø Labor Party.
Tom Tobiassen in the Bø Labor Party.
Photo: NRK
– Did the Labor Party in Bø think it was okay for you to bill for part of the wealth tax cut to all the other municipalities in the country, so that you could get a tax advantage that no one else gets?
– When you put it that way, it’s kind of unfriendly. But that’s not our starting point, Tobiassen responds.
He admits that the base of the choice was in the thinnest layer. But don’t regret that the party supported the reduction of the estate tax.
– The great debates that the party has to deal with. We work for a municipality threatened by population decline. For a small municipality, this is good Labor Party policy, because that leads us to create more jobs, he says.
He believes that Bø has bet on the welfare of the inhabitants
The local SV leader is surprised that none of the other city council parties voted against the proposal.
– A postponement should have been requested to investigate and calculate. When you look at it that way, I think it’s scary, he says.
He is also supported by Professor of Economics Jarle Møen at the Norwegian School of Management (NHH).
Professor and Head of Department Jarle Møen at the Norwegian School of Management.
Photo: E vivos Senneset
He believes that it is reprehensible that a city council has made such extraordinary decisions without studying the consequences in advance.
– As I see it, Bø has played with the welfare of the inhabitants, says Møen.
But he also understands that Bø receives help. After all, the government changed the regulations. then that Bø had approved the tax cut, and it was this rule change that made the calculation so bad for Vesterål municipality.
– It was absolutely correct to change the income transfer model so that the municipalities that reduce the wealth tax must bear the full cost. But the change took a form of retroactive effect. At the same time that Bø was being praised for their initiative, the government pushed them off the cliff through the municipal bill for 2021, which came six months after Bø made its decision. The full consequences were also not clearly communicated.
Therefore, Møen believes that it is reasonable to give Bø a transitional arrangement so that residents are protected from dramatic cuts.
– I suppose it will be quite difficult to cover the part of the fiscal cost that they still have to pay themselves, he says.
Sigrid Klæboe Jacobsen, General Manager of Tax Justice Network Norway, also believes that the mayor has played.
Sigrid Klæboe Jacobsen, Managing Director of Tax Justice Norway. The network was founded in 2010 as an independent organization that is part of the Global Global Alliance for Tax Justice that works for global tax justice.
Photo: Johan B. Sættem
– Bø’s explanation is unclear. The only thing they could know for sure was that reducing the estate tax would lead to less income. The advantage was very uncertain. They have simply played on behalf of their citizens, he says.
Mayor of Bø: – Greater risk of not doing it
Sture Pedersen is the mayor of Bø and understands that several are critical of his decision.
He does not deny that it is called an experiment since they did not know the result, but he says that the alternative was worse. That is, even fewer Bø rooms.
– The statistics show a clear decline. I do not agree that we have bet on the welfare of the inhabitants. The risk was greater by doing nothing.
Mayor Sture Pedersen in Bø acknowledges that they had little information about the consequences of the tax cut. But he points out that it is worse for people to move from Bø and that something has to be done.
Photo: Bjørn Tore Pedersen / NRK
– But what information did you present to the city council last year?
– There was little information that could be obtained on what the consequences would be like. And since everything related to the calculation was so uncertain, we have produced a balanced budget that states that we keep the population as it is today.
– Shouldn’t you have gotten the reports in advance?
– We did not put that information and it was difficult to obtain it from all the people we approached. But what we do know is that we lose a lot of money losing people, Pedersen responds.
– Do you think you did a good job getting the information?
– We don’t know that answer for a couple of years.
– So it’s an experiment?
– The experiment is no more dangerous than the population decline that we see.
He believes that they would lose as much or more money if people continued to move from Bø.
-I have no decision that we will succeed with the measure, but at least we have tried, he says.
