Norwegian financial media E24 reported in December that Bø, located in the Vesterålen region of Nordland county, was the country’s first municipality to reduce inheritance tax for its residents.
The local authority made the decision in order to “attract risk-prepared capital and persons who can create jobs,” the municipality’s spokesperson with the Conservative party, Sture Pedersen, told E24.
That would in turn stem the trend of depopulation of the region, Pedersen explained.
Norway’s inheritance tax rate is currently 0.85 percent (net a base deduction), of which 0.15 percent goes to the state and 0.70 percent to the local municipality. Individual municipalities can choose to reduce their share.
Bø’s initiative to do just that was reported in Norway in December and has since been noted by UK newspaper the Sunday Times, under the headline ‘Tax breaks tempt wealthy Norwegians to Arctic islands’.
Inheritance tax in Bø is now 0.35 percent, with the municipality taking 0.20 percent.
Pedersen previously told E24 that he wanted Bø to be “Norway’s answer to Monaco”.
The municipality currently has 2,600 inhabitants, of which between 400 and 500 were expected to benefit from the tax break, E24 wrote.
Its council representative told NRK on Monday that he welcomed the international publicity.
“The article presents our region as exciting and exotic. I’m very pleased with that. I mostly hope to attract investors who want to back tourism, but also people who want to invest in the property market,” he said.
In order to benefit from the inheritance tax break, an investor must either move to Bø or invest in business in the area.
“This isn’t a post-box system. You have to move to Bø or register an address in Bø,” Pedersen told NRK.
Kjell Arne Brekke, a professor at the University of Oslo’s department of Economics, warned of a negative direction for Norway in the long term.
“This can be compared with countries which have low taxes to attract people, which in a way undermines the whole system,” Brekke told NRK.
“If different municipalities are to compete over tax, others can follow suit and it will then give a smaller effect for the municipality which was first to cut tax, and everyone will lose out in the long term,” he said.
Pedersen said that the primary aim of the measure was not to simply give tax breaks.
“We are doing this to bring badly needed capital to a small municipality in North Norway,” he told NRK.