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MONEY

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

The proposed Norwegian state budget for 2022 is here, but what does it mean for your wallet?  

Here's how the proposed state budget for 2021 will affect your finances in Norway. Pictured is somebody holding one 50 kroner note and one 500 kroner note.
Here's how the proposed state budget for 2021 will affect your finances in Norway. Pictured is somebody holding one 50 kroner note and one 500 kroner note. Photo by Norges Bank on Flickr.

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
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.
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

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For members

EUROPEAN UNION

Pensions in the EU: What you need to know if you’re moving country

Have you ever wondered what to do with your private pension plan when moving to another European country?

Pensions in the EU: What you need to know if you're moving country

This question will probably have caused some headaches. Fortunately a new private pension product meant to make things easier should soon become available under a new EU regulation that came into effect this week. 

The new pan-European personal pension product (PEPP) will allow savers to take their private pension with them if they move within the European Union.

EU rules so far allowed the aggregation of state pensions and the possibility to carry across borders occupational pensions, which are paid by employers. But the market of private pensions remained fragmented.

The new product is expected to benefit especially young people, who tend to move more frequently across borders, and the self-employed, who might not be covered by other pension schemes. 

According to a survey conducted in 16 countries by Insurance Europe, the organisation representing insurers in Brussels, 38 percent of Europeans do not save for retirement, with a proportion as high as 60 percent in Finland, 57 percent in Spain, 56 percent in France and 55 percent in Italy. 

The groups least likely to have a pension plan are women (42% versus 34% of men), unemployed people (67%), self-employed and part-time workers in the private sector (38%), divorced and singles (44% and 43% respectively), and 18-35 year olds (40%).

“As a complement to public pensions, PEPP caters for the needs of today’s younger generation and allows people to better plan and make provisions for the future,” EU Commissioner for Financial Services Mairead McGuinness said on March 22nd, when new EU rules came into effect. 

The scheme will also allow savers to sign up to a personal pension plan offered by a provider based in another EU country.

Who can sign up?

Under the EU regulation, anyone can sign up to a pan-European personal pension, regardless of their nationality or employment status. 

The scheme is open to people who are employed part-time or full-time, self-employed, in any form of “modern employment”, unemployed or in education. 

The condition is that they are resident in a country of the European Union, Norway, Iceland or Liechtenstein (the European Economic Area). The PEPP will not be available outside these countries, for instance in Switzerland. 

How does it work?

PEPP providers can offer a maximum of six investment options, including a basic one that is low-risk and safeguards the amount invested. The basic PEPP is the default option. Its fees are capped at 1 percent of the accumulated capital per year.

People who move to another EU country can continue to contribute to the same PEPP. Whenever a consumer changes the country of residence, the provider will open a new sub-account for that country. If the provider cannot offer such option, savers have the right to switch provider free of charge.  

As pension products are taxed differently in each state, the applicable taxation will be that of the country of residence and possible tax incentives will only apply to the relevant sub-account. 

Savers who move residence outside the EU cannot continue saving on their PEPP, but they can resume contributions if they return. They would also need to ask advice about the consequences of the move on the way their savings are taxed. 

Pensions can then be paid out in a different location from where the product was purchased. 

Where to start?

Pan-European personal pension products can be offered by authorised banks, insurance companies, pension funds and wealth management firms. 

They are regulated products that can be sold to consumers only after being approved by supervisory authorities. 

As the legislation came into effect this week, only now eligible providers can submit the application for the authorisation of their products. National authorities have then three months to make a decision. So it will still take some time before PEPPs become available on the market. 

When this will happen, the products and their features will be listed in the public register of the European Insurance and Occupational Pensions Authority (EIOPA). 

For more information:

https://www.eiopa.europa.eu/browse/regulation-and-policy/pan-european-personal-pension-product-pepp/consumer-oriented-faqs-pan_en 

https://www.eiopa.europa.eu/browse/regulation-and-policy/pan-european-personal-pension-product-pepp_en 

This article is published in cooperation with Europe Street News, a news outlet about citizens’ rights in the EU and the UK. 

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