OSLO: Norway has proposed raising taxes for the vast oil and gas sector from 2014, lowering them for traditional industries and closing a tax loophole for multinational firms that shift profits to lower-tax countries.
Norway, the world's seventh-biggest oil exporter, will lower the amount that energy firms can write down on their investments while non-energy firms will see their corporate tax rate fall to 27 percent from 28 percent.
Starting next year, energy firms would be able to write off only 22 percent of their investment costs from the special energy tax, down from 30 percent earlier, increasing the financial risk of delays and cost overruns.
We must increase the industry's cost-consciousness, Prime Minister Jens Stoltenberg told a news conference. We see big cost overruns, and the state ends up paying for most of it.
The tax hike for the oil sector will average around 3 billion crowns ($ 520 million) a year through 2050, while the corporate tax cut will lower revenues by about 3 billion, the Prime Minister said.
Key projects in the offshore sector, which accounts for a fifth of Norway's GDP, have run into huge delays and cost overruns in recent years, reducing government revenue and prompting a government investigation.
Stoltenberg is facing elections in September, and polls indicate that his Labour party will be easily defeated by the center-right opposition after eight years in office.
The oil industry's marginal tax rate is high by international standards at 78 percent, but the government provides heavy support at the investment phase, including a 78 percent rebate related to drilling.
As oil prices LCOc1 stay comfortably over $ 100 a barrel and energy firms make big discoveries in areas once thought close to depleted, Norwegian oil investment is hitting record highs, extending the sector's outlook several decades into the future.
In addition to the corporate tax cut, Norway will close a tax loophole to avoid multinational corporations shifting taxable profit from Norway to low tax countries.
This change will save around 3 billion crowns, financing the overall corporate tax rate cut.
Companies outside the energy sector have been struggling as the oil sector crowds out traditional industries, ramping up wages. Export demand has also been weak due to Europe's debt problems while a strong currency is hurting competitiveness.
Reproduced with permission from Arab News