The Faroese government on Friday officially presented to the parliament a proposal to adjust the revenue tax on the salmon farming industry.
The proposal comes in the wake of a separate but similar development in Norway, where the Norwegian government announced a plan to bring in a new 40-percent ground rent tax on the industry. The announcement wiped out NOK 55.9 billion ($5.2 billion) in stock market value of Oslo Børs-listed companies.
Faroese farmers are currently charged a special revenue tax on the value of harvested fish, calculated using actual salmon spot prices.
Recent record-high salmon prices as well as the increasing production costs for the salmon industry are prompting the government to revise the revenue tax system, said Bakkafrost, the largest salmon producer in the Faroe Islands.
Key changes in the tax regime
· The number of applicable tax rates will change from 3 to 5
· Increasing the salmon price thresholds that determine when each tax rate is applicable
· Linking the salmon price threshold to the average production cost for the Faroese salmon industry, which will be assessed annually
It said that the thresholds are based on the average annual production cost for the Faroese salmon industry. For 2023, an average production cost of 39.15 danish krone (56.08 NOK, $5.15/kg) will be applied.
Revenue tax rates in 2023
Based on the 39.15 DKK threshold, the revenue tax rates in 2023 would be:
· 0.5 percent if the salmon spot price is less than 39.15 DKK/kg (approx. 55 NOK/kg, 5.05/kg)
· 2.5 percent if the salmon spot price is between 39.15 and 44.15 DKK/kg (approx. 55-62 NOK/kg, $5.05 kg-$5.69/kg)
· 5 percent if the salmon price is between 44.15 and 54.15 DKK/kg (approx. 62-76 NOK/kg, $5.69/kg-$6.98/kg)
· 7.5 percent if the salmon price is between 54.15 and 69.15 DKK/kg (approx. 76-97 NOK/kg, $6.98-$8.91/kg)
· 10 percent if the salmon price is above 69.15 DKK/kg (approx. 97 NOK/kg, $8.91//kg)
The proposal has not yet been passed by the Parliament.