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Bø in Vesterålen has received a lot of attention for its wealth tax cut. Just before Christmas, the Strand Township in Rogaland also announced a similar cut.
– All municipalities have the opportunity to reduce the income tax and the municipal wealth tax. When no one has, it is probably because you may know that it is very difficult with the kind of detailed income system we have, Solberg tells NTB.
It points out that the opening of legislation for local cuts in income and wealth tax is not related to the fine mesh system for redistribution of income and coverage of expenses in Norwegian municipalities.
– The system is not adapted and is of course being questioned now, says the Prime Minister.
Disputed
Starting January 1, 2021, Bø will cut the local portion of the wealth tax from 0.7 to 0.2 percent. Strand will reduce the wealth tax from 0.7 to 0.45 percent in 2022.
The move to Bø’s mayor, Sture Pedersen, has created a national debate about the financial consequences. KS economists have concluded that municipalities making such decisions should prepare for revenue reduction in the first few years after the reduction.
The tax cut will inflict around Bø around NOK 5 million in lost income on those already living in the municipality. This loss will be borne by the municipality itself.
At the same time, the government has made a special exception for Bø. The municipality will receive help to cover the community tax losses that occur when wealthy people move into the municipality, according to NRK.
The revenue system committee will conduct a comprehensive review of the municipalities revenue system by June 1, 2022.
Outside the Box
Solberg still believes that it is good for people to “think outside the box” and challenge established truths.
– Sture in Bø has done it for a long time. It has helped create the conditions for one of the companies that produce computer systems for the municipal sector to establish itself in Bø, he says.
– But how do wealth tax cuts create jobs locally?
– Having people with high wealth and high economic activity has a domino effect that is not just about taxes to the municipality. It contributes to an environment that allows you to get more income, activity and investments, says Solberg.
But economics professor Jarle Møen at the Norwegian School of Management is skeptical about using the reduced estate tax as a business policy tool.
– It will be financially profitable to move to Strand, but it will not be more profitable to create jobs locally. The capital that the new inhabitants own can be invested anywhere without affecting the tax, he tells NRK.
– Local tax havens
Both the Labor Party and the Socialist People’s Party have launched into the debate over local cuts in the wealth tax.
– The remaining spending, an uncovered bill, will be higher the more municipalities decide to do this, SV’s fiscal policy spokeswoman Kari Elisabeth Kaski tells NTB.
– We want to eliminate the opportunity that municipalities have to reduce the tax on municipal assets, because it will involve local tax havens throughout the country, he emphasizes.
Labor MP Bjørnar Skjæran cautions against cuts to the estate tax, a tax he believes is an important part of a fair tax system.
– When the invoice for this is also sent to all other municipalities, it becomes doubly unfair, he writes on Facebook.
At their national meeting this fall, the Conservatives decided to eliminate the entire estate tax, a measure that would cost around NOK 15 billion. But Solberg rejected shortly after that it is relevant to eliminate all the disputed tax.
