The Norwegian Tax Administration earlier this year sent letters to fifty Norwegian employees at the US embassy, demanding payslips for the time they had worked at the embassy.
As a result of their investigation, between 15 and 20 of those employees now face up to a year in prison and NOK 500,000 ($83,000) in fines. They will also have to pay unpaid back taxes.
"This case is extensive and serious," tax director Hans Christian Holte told Norway's TV2 channel. "I think it's very good that we have revealed this."
The US embassy in Oslo has long refused to report salary and wage information on its Norwegian employees, in clear contravention of Norwegian law.
"As a matter of long-standing policy and practice, our embassies do not share salary information about our personnel with local governments," the embassy said in a statement. "This avoids placing the US mission in the position of agent for host state tax authorities."
An employee at the embassy told TV2 that low wages had encouraged embassy staff to evade Norwegian taxes.
"It was common practice among the staff at the embassy only to report parts of their pay to the tax authorities," he said. "The reason for this is that the workload and responsibility were huge at the embassy when compared with the wages."
Atle Myklebust at the Oslo tax office said that although the embassy was obliged under Norwegian law to report employees wages, their diplomatic immunity made the obligation impossible to enforce in practice.
"They have diplomatic immunity, so we can't use any kind of force. We can't ask to look at their accounts," he said. "The idea of the Vienna Convention, of course, is that they're supposed to do everything in accordance with our laws."
He said that only six of the biggest 15 embassies in Norway reported salary information, meaning that employees at the US embassy were probably not the only ones evading taxes.
The Oslo tax office sent out a letter to embassies a few years ago, requesting that they start providing salary details, but received no response. ￼