‘Resource tax’ shock for Norwegian industry
NORWAY’S fish farmers are still reeling from the news that the Norwegian Government is to introduce a new “ground rent tax” on their marine operations.
The levy, also referred to as a “resource tax”, was confirmed in the Norwegian Government’s budget on 6 October, the first to be delivered by Trygve Slagsvold Vedum, Finance Minister in the centre-left coalition which came to power this year.
It is expected to generate revenues of up to NOK 3.8bn (£325m) annually.The measure will take effect as from the 2023 tax year. Proceeds from the tax will be shared equally between national and municipal authorities.
The resource tax is also being levied on Norway’s offshore wind industry, but it will not apply to land-based fish farms.
Smaller farmers, producing less than 5,000 tonnes a year, are set to be exempt from the new tax, but larger producers of salmon and trout have seen their share prices plummet and many have taken action to scrap investment plans.
Mowi, which is cancelling a £19m biomass increase, said:“The aquaculture industry is a future industry that we, as a nation, want to grow, and the proposed tax proposal affects investment ability and willingness very negatively.”
The company argued that what will become a total tax rate of 62% will stop significant investment along the entire coast which will not only lead to fewer jobs locally, but also the transfer of value from the coastal communities to central areas.
Mowi also pointed out that it is a global business, suggesting that there are other countries, (including Scotland and Ireland), where it can funnel investment.
The Lerøy Seafood group and Cermaq are also shelving investment plans. Cermaq CEO Steven Rafferty said: “Based on the new proposal, we have no choice but to put investment plans on hold.The proposal will affect growth and job creation in many coastal municipalities in which we operate.
“Cermaq has investment of more than NOK 5bn [£415m] in its two Norwegian farming areas of Nordland and Finnmark since 2016 and the intention was to invest a similar amount in the coming years.
“We planned a new hatchery in Hasvik municipality in Finnmark that would contribute 30 new jobs, but that project has now been put on hold.”
Similar sentiments have been expressed by Lerøy, which is cancelling plans to purchase 614 tonnes of maximum permitted biomass worth NOK 123m (£10m) and postpone a NOK 420m (£35m) increase in production capacity in Troms county.
The company said:“It [the tax plan] creates unjustifiable framework conditions for the industry in Norway, and changes opportunities and incentives for investments other than maintenance.”
CEO Henning Beltestad added:“Norway should take responsibility, not least in these times, and continue to facilitate the production of food for the world’s population.
“The proposal for ground rent tax will stop the development of the industry’s value chain and thus reduce all its direct and indirect ripple effects along the coast.”
There has also been speculation that some large salmon producers could be broken up in order to bring production below the 5,000 tonne threshold.
Seafood Norway, the fishing and aquaculture
employers’ organisation, has accused the Norwegian government of worsening an already dramatic situation for the country’s seafood.
Chief Executive Geir Ove Ystmark said that while the shock of the 40% ground rent tax was starting to subside along the coast, the industry was already witnessing an investment freeze that the country cannot afford.
He continued:“The aquaculture industry has already had the handbrake completely pulled up.This is very dramatic for activity and job creation along the coast.”
“Increased wealth tax and increased dividend tax reinforce the cocktail of increased valuation and increased rates on the two taxes.This creates further challenges for the aquaculture companies. But it does not exclusively affect aquaculture directly. It affects all Norwegian ownership.
“For the fishing industry and the supplier industry, there are initially tight margins.The proposed changes to the aquaculture tax have already created reduced assignments for the supplier industry and the structure of the ground rent tax weakens the potential for processing salmon and trout in Norway.The increased rates intensify the problems for this part of the industry as well.”
Ystmark added:“Norwegian business must have the finances to carry out the green shift.
We need 250,000 new, profitable jobs by 2030.
“I can’t see that the government has realized that this requires economic muscle.”
Calculations by the business organisation NHO showed that the country is facing significantly tougher economic times than the government has anticipated in its budget plans. Ystmark said Seafood Norway will thoroughly review the totality of what the government has put forward and continue the political work until the budget hearings in the Storting, Norway’s parliament.
Trygve SlagsvoldVedum appears to be undeterred by the industry’s reaction. He told financial website E24 that Mowi alone has paid out around three billion krone to shareholders so far this year.
He said he wants the industry to be profitable, pointing out that companies also get a 40% tax allowance for investments. He also intends to consult local communities about his plan.
Vedum also told E24 that Mowi’s largest shareholder John Fredriksen and SalMar founder Gustav Witzøe had made enormous fortunes from using Norway’s fjords, so they should share more with the local communities. Asked if he had nightmares about “emigrating salmon barons and dying coastal villages”, he replied “No – I have not”.