How Norway's proposed state budget for 2022 could affect your finances

The outgoing Erna Solberg government has presented its state budget for 2022 with several key proposals. 

Among the headline proposals are a considerable reduction in spending overall, including a significant cut in the use of oil money. 

Minister of Finance Jan Tore Sanner said that this is a budget to move past the Covid-19 pandemic. 

"With cooperation and action, we have handled the steepest economic downturn since World War II. In 2022, the activity will be higher than normal, the job opportunities will be good, and almost all adults will be vaccinated. With continued good preparedness in the health service and joint efforts, we will together put the pandemic behind us," he said in a statement on the government's website. 

It's worth noting that the proposal is set in stone. Incoming prime minister Jonas Gahr Støre will decide what the final state budget will look like. The Labour Party and the Centre Party will have until November 10th to submit any amendments. 

Price of petrol to increase

The outgoing government has proposed a bump on the CO2 tax on petrol, meaning filling up may become more expensive if Støre decides to include the proposal in the final state budget. 

The government have proposed raising petrol tax. Picutred is somebody filling up their car. Photo by Skitterphoto on Pexels.

An increase of 41 øre from 1.37 kroner to 1.78 kroner per litre has been proposed. This will not be offset with a cut to road tax, as has been the case with other petrol tax hikes in the past.

This will make it more expensive to fill up due to the hefty tax raise on fuel. 

More expensive diesel

It's not just petrol taxes getting pumped. Diesel will also see a tax increase of almost 30 percent. The CO2 tax on diesel will rise from 1.58 kroner per litre to 2.05 kroner.

Wealth tax changes

The government proposes a significant tax increase on homes worth more than 15 million kroner by lowering the valuation discount as part of the wealth tax. 

Currently, a 75 percent discount is given. This means only 25 percent of the estimated house value is taxed. 

In the proposed budget, the discount is reduced to 50 percent. There will also be a small 5 percent increase in the valuation of second home calculations.

In addition, the wealth tax threshold is being increased from 1.5 to 1.6 million kroner for individuals, doubled for couples. The total value of a persons global net worth above this threshold will be taxed at 0.85 percent with certain deductions and discounts for assets. 

Slightly cheaper electricity

In light of rising energy prices, the government has proposed cutting electricity tax by 1.5 øre per kilowatt-hour.

The average electricity price in Southern Norway is 111.1 øre per kWh, according to energy price analysis site NordPool. 

READ ALSO: Rising energy prices: How to save on your Norwegian electricity bill

Pricier tobacco

Cigarette smokers and snus users may be edged towards quitting if they weren't considering it already, with proposed taxes on tobacco products increased by between 5.9 and 6.5 percent respectively. 

Smoking will burn an even bigger hole in your pocket if the tax increase is introduced. Pictured is a cigarette. Photo by Andres Siimon on Unsplash

READ ALSO: What is snus and why do so many Norwegians use it?

More expensive to buy a car

Buying a new car that is either fully powered by combustion or is a hybrid looks set to become more expensive. This is because the one-off CO2 tax for new cars that use fossil fuels will increase by 36.8 percent for vehicles with emissions above 87 grams of CO2 per kilometre. 

The one-off tax for fossil fuel vehicles is calculated based on the vehicle's tax group, dead weight, CO2 emissions, NOx emissions and stroke volume. 

The threshold for achieving the maximum deduction on the one-off charge on hybrids will require the car's electric range to be 100 kilometres instead of 50 kilometres. 

There's bad news for electric car owners, too, as a total motor insurance tax has been mooted for electric cars.

Slight tax decrease for low and middle incomes 

The bracket tax for those in the first and second income brackets will be reduced by 0.3 and 0.2 percentage points, respectively. 

Residents of Norway pay an income tax of 22 percent, in addition to a bracketed tax that is calculated based on your income. Those with an income of less than 260,100 will now pay a 1.4 percent bracket tax, and those who earn between 260,100 and 651,250 will pay a 3.8 percent bracket tax. 

The bracket tax may be reduced more in the future as the Labour Party and Centre Party have promised tax cuts for lower earners.