Norway leading the field for tax revenue

The latest report from the Organization for Economic Cooperation and Development (OECD) shows the tax burden faced by Norwegians dropped more than in any other country in 2014.

Norway leading the field for tax revenue
Photo: Scanpix

Flying in the face of Norway’s reputation as expensive and highly-taxed, Norwegian taxes decreased more than in any other country last year. Taxes also continue to bear favourable comparison with other countries.

A newly released report from the OECD shows a tax revenue-to-GDP ratio decrease of 1.4 percent for 2014, taking the Norwegian figure down to 39.1 percent. This continues to decrease the gap to the average for OECD countries, which has increased by two percentage points to 34.4 percent. The Norwegian tax ratio is therefore now 4.7 percent higher than the average, compared to 6.3 percent in 2013 and 9.1 percent in 2010.

The Norwegian figure also leaves its Scandinavian neighbours trailing in its wake, with Sweden’s tax revenue forming 42.7 percent of GDP and Denmark coming in at an astonishing 50.9 percent.

With a percentage point increase of over four percent since 2007, Denmark is also near the top of the table for overall tax burden increase since the beginning of the global financial crisis. Norway is one of only three countries – the other two are Spain and Israel – to have seen a decrease of three percent or more during this period.

The OECD report shows an increase in overall tax burden across OECD countries of 0.2 percent, continuing the trend of year-on-year increase since 2009. However, the percentage of the latest increase is primarily due to the increased taxation of personal income, personal profit and consumption, with taxes on corporations decreasing overall.

Between 2007 and 2014, average revenues in OECD countries from corporate incomes and gains fell from 3.6 to 2.8 percent of GDP, while revenues from individual income tax grew from 8.8 to 8.9 percent. Revenues from value added tax (VAT) grew from 6.5 to 6.8 percent in the same period.

“Corporate taxpayers continue finding ways to pay less, while individuals end up footing the bill,” OECD Centre for Tax Policy and Administration director Pascal Saint-Amans said as the organisation published its report.

The percentage of Norway’s tax revenue from personal incomes and capital gains in 2014 stood at 24 percent, close to the OECD average of 25 percent. Corporate taxes, at 22 percent of overall Norwegian tax revenue, were significantly higher than the OECD value of eight percent.

VAT rates are identical in all three Nordic countries at 25 percent, just behind the most expensive VAT country, Hungary, which has a 27 percent rate.

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Tax returns in Norway: Five things you need to know

Norway’s tax season is upon us. We’ve put together some essential tips and information to help you understand the Norwegian tax system better. 

Tax returns in Norway: Five things you need to know

Keeping track of the key dates

Taxes can be tricky for some, but it can pay to be prepared. Keeping track of this year’s key dates when it comes to tax season can be a huge helping hand. 

Tax returns are already being sent out and will continue to be posted until April 4th. Then, April 30th will see the deadline to submit your tax return. 

If you feel like you need more time to assess the previous year’s finances, the end of April also sees the deadline for applications for a postponed deadline. 

READ MORE: The key Norwegian tax season dates you need to know about

You are able (and meant) to add any student loans from abroad to your tax return

You can add your student loan to your debts and claim the interest as tax-deductible. In fact, you are supposed to declare all overseas assets, received and earned interest, in addition to any debts and loans.  

However, this means the debt is visible to Norwegian lenders, which can impact your lending ability.

You can get a rough idea of whether you can expect a rebate or repay tax

After submitting your tax return, you will receive a tax assessment notice. In addition, you’ll receive a notice with information regarding how much money you’ll receive as a rebate or how much you’ll need to repay if you’ve overpaid. 

When you receive this will give you a fair idea of whether you can expect money back or if you’ll need to dig into your pockets to pay back any money you owe. 

If you receive your tax assessment notice in May, you will likely be due a refund, whereas if you receive it from June onwards, you’ll probably owe the tax man money. 

Tax return versus a tax receipt

Most people working in Norway will receive a tax return, which is an outline of your income, deductions, wealth and debt. However, not all people will receive a tax return, and some will receive a tax receipt. 

If you participate in the PAYE (Pay as You Earn) scheme, you will not receive a tax return. Instead, you will receive a tax receipt, which shows the amount of tax that you’ve paid in Norway. Those in the PAYE scheme play a flat rate of 25 percent. 

One of the key differences is that you cannot claim deductions with a tax receipt. Also, some lenders only accept tax returns rather than receipts when it comes to giving credit. This means those on the PAYE scheme may find it challenging to build a credit history in Norway as their income and earnings are not taken into account. 

You are expected to pay tax on your worldwide income 

Once you are considered a tax resident of Norway, you generally are required to pay tax on your worldwide income. Tax residency is slightly different to legal residence. 

The rules can be a bit complex, and if you are earning an income in two countries, several factors will come into play, such as whether Norway has a tax treaty with those countries and how much you are taxed on that income in other countries. 

If you have any questions or queries regarding your tax, it is best to contact The Norwegian Tax Administration or a qualified accountant.