The Støre government is displaying a fiscal greed of historic dimensions.
After wealth tax has been this year’s major topic of discussion in the Norwegian fish farming industry, Prime Minister Jonas Gahr Støre and Finance Minister Trygve Slagsvold Vedum tightened the tax screw even more on Wednesday morning. The proposal for a 40 per cent resource rent tax sends the tax rate up to 62 per cent for salmon and trout farming.
Not unexpectedly, the proposal caused a salmon crash on the stock exchange. During the morning, shareholder valued of EUR 3.7 billion disappeared.
In this way, the government, if nothing else, effectively contributes to reducing wealth tax.
In two weeks, new licenses for salmon farming will be auctioned in Norway. With this year’s record-high salmon prices, there have been expectations, at least until today, of significantly higher auction prices than the last time a license auction was held. At the time, the bids ended up around EUR 20 million each.
With an effective tax rate of 62 per cent, it goes without saying that the cash flow from food fish concessions will be drastically reduced. The premises for the calculations change. This reduces the bids – and the tax revenue to the state.
Ready for harvesting
The farming industry is now ready for harvesting, the government obviously believes.
In addition to ordinary tax, there will be production fee, stricter wealth taxation (linked to significantly increased valuation of licenses) and now a whopping 40 per cent resource rent tax. The industry is thoroughly regulated and soon exceptionally heavily taxed.
Knut Ivar Bakken, analyst at Sparebank 1 Markets, believes today’s tax shock and stock market crash will reduce confidence in the Norwegian stock market going forward.
“The tax proposal shows foreign, and to that extent also Norwegian investors, that it is unpredictable and unattractive to invest in seafood. Preferably also in other raw materials,” says Bakken to DN.
The resource rent tax has not yet been introduced. It needs support in the Parliament. It is not obvious that it gets it. But given that the proposal is adopted, the most noticeable effect will be a steep loss of industry investments.
The last decade has, as a function of reduced supply growth, produced high salmon prices and unusually healthy earnings. This has stimulated investment budgets and innovation – unprecedented in the industry’s history.
But it is clear that advanced closed facilities in the sea and farming in rigs in the open ocean do not have the same high attractiveness for those who control the money in the fish farming companies from now on. Then it is more advantageous to use the money abroad. Preferably on energy-intensive land-based farming – preferably somewhere where electricity prices are lower than in southern Norway.