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KEY POINTS: The changes to Norway’s 2022 budget that could impact you

Norway's new government has presented the changes it wishes to make to the proposed state budget for 2022, which includes several alterations that affect taxes, electricity prices, childcare, healthcare and more. 

Public transport routes in Norway could be cut back as the government will be ending a compensation scheme at the end of the year. Pictured is a tram in Oslo.
Public transport routes in Norway could be cut back as the government will be ending a compensation scheme at the end of the year. Pictured is a tram in Oslo. Read about that and other key changes to the budget. Photo by Steven Larsy on Unsplash.

Norway’s government, led by prime minister Jonas Gahr Støre, has unveiled the chops, changes, modifications and adjustments it wishes to make to the state budget for 2022. 

Finance minister Trygve Slagsvold Vedum presented the changes on Monday afternoon after the initial budget was presented by the ousted Solberg government on its way out of parliament last month. 

“The government has had three weeks to prepare a new draft state budget. I think we have used our time well. With the tax measures we are taking in this budget, people will notice that the country is on a new course. Two out of three will be taxed less,” Vedum said in parliament on Monday. 

The government will have until December to push the budget proposal through parliament, with the Socialist Left Party their preferred budget partners. 

They may face an uphill task to convince their preferred party to help get their budget greenlit as the Socialist Left Party hasn’t greeted the fiscal plan for 2022 warmly. 

“This is too grey and too small for Norway. There are some measures here, but it’s not a new direction for the country,” Kari Elisabeth Kaski, the fiscal policy spokesperson for the Socialist Left Party, told public broadcaster NRK.

Cuts to electricity tax

This winter, energy bills are on course to reach eye-watering heights, with record after record being smashed this autumn. 

Finance minister and Centre Party leader Trygve Slagsvold Vedum has proposed a 48 percent cut to electricity tax to be implemented when prices are at their highest. 

The nearly 50 percent slash will be applied between January and March. Then, for the rest of the year, a permanent cut of 9 percent will be put in place. 

The proposal will cut consumers’ electricity prices by around 10 øre per kilowatt-hour during the months where tax will be almost halved. 

Tor Reier Lillehol, from the analysis firm Volue Inishgt, has said that a private individual could save between 500 to 1,000 kroner a year, while newspaper VG has said the average family would save around 750 kroner per year

READ ALSO: What times of day should you avoid using electricity in Norway?

Cheaper childcare

The maximum price for a daycare place will be reduced for the first time in eight years. Families with one child in a daycare centre will save 2,900 kroner per year, and a family with two kids in daycare will save 4,900 kroner. 

This is because the maximum spot kindergartens can charge for a spot will be reduced from 3,315 kroner a month to 3,050 kroner. 

Lower taxes for most 

Those who earn between 250,000 and 700,000 kroner per year annually will pay between 1,000 to 1,700 kroner per year less in tax. 

In addition, those aged between 17 and 29 who earn less than 535,000 kroner will receive a tax credit of up to 5,170 kroner.

Residents of Norway pay an income tax of 22 percent, in addition to a bracketed tax that is calculated based on your income.

Tax deductibles for being a union member will also double over two years from 3,850 kroner to 7,700 kroner. 

The government has scrapped the plans for an employment tax deduction for young people.

Higher threshold for exempt card 

The government will increase the threshold required to receive completely free healthcare by 461 kroner. 

In Norway, healthcare is heavily subsidised with small deductibles being paid for treatment. Once you reach a yearly limit then all subsequent health care that is included in the Norwegian National Insurance Scheme is free and you’ll receive an exemption card. 

From next year the new threshold for the card will be 2,921 kroner.

Public transport routes could be cut

Many public transport operators have warned in recent weeks that the routes and services offered may be peeled back due to a loss in passenger revenues due to Covid. 

The government’s proposal for next year outlined the corona compensation, which set aside money for transport companies that saw passenger numbers drop, will end.

However, Minister of Transport Jon-Ivar Nygård stressed that the government was keeping an eye on the situation.

Wealth tax increases

The Støre government has also said it will increase the wealth tax beyond what the Solberg government pledged. 

The rate of the overall wealth tax will be 0.95 percent of one’s net worth. Norway’s wealth tax applies discounts and deductions on assets such as a primary residence. 

Houses worth more than 10 million kroner will see a wealth tax increase. Primary homes are currently valued at 25 percent of market value. Under the proposed rules, the portion of a house valued above 10 million, for example, five million kroner, if the property is worth 15 million, will be taxed at 50 percent of market value. 

Those who own a second will have to pay wealth tax on 95 percent of the house’s value, compared to 90 percent currently. 

Changes at duty-free 

The government will change the rules for alcohol and tobacco quotas so that unused tobacco quotas won’t be allowed to be substituted for additional alcohol. 

Previously if you hadn’t bought any tobacco products, you could purchase more alcohol duty-free.

Transport and travel changes

Ferry prices will be cut significantly, with the government pledging 1 billion to help bring them down. We previously reported on the government wanting to slash the cost of ferry tickets by 50 percent

Fuel will be cheaper than initially proposed by the Solberg government in the initial state budget. Fuel will be 18 øre per litre cheaper in taxes than the Solberg government suggested, but still more expensive overall. Petrol tax will still be increased to 1.60 kroner per litre, and diesel tax will increase to 1.87 per litre. 

The air passenger tax will also be reintroduced. The low rate will be 80 kroner, and the high rate will be 214 kroner.

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How much poverty is there in Norway?

Despite the country's reputation for its wealthy residents, food banks in Norway have reported increased use. So, how much poverty is there in Norway? 

How much poverty is there in Norway?

The number of people using centres that distribute free food to those in need is rising, Norwegian newspaper VG reports. 

Food Banks Norway (Matsentralen Norge) has said that it has distributed 32 percent more food this year and that queues are now being seen at centres all over the country. 

“In the last year, with increased electricity prices, war in Ukraine, more expensive petrol and diesel and increased food prices, we have experienced a very large increase. The organisations come to us and collect food. We are struggling to get protein-rich dinner food for everyone who needs it and have to distribute it among those who pick it up. It is hard for them,” Anne Merete Pedersen from the Food Banks Norway in Rogaland County told the paper. 

Typically, Norway is known for its steady economy, large wages and high standard of living, so to many, it may seem surprising that the use of food banks is on the up- even with the cost of living soaring across Europe. 

So, how much poverty is there in the Nordic country known for its wealthy residents? 

Poverty can be hard to pin down, especially in a country known for such high salaries. Therefore the best metric to measure poverty in Norway would be relative poverty. Relative poverty is measured in relation to the majority of the population in a country. One who is significantly worse off than most people in a nation can be considered to be in relative poverty.

According to estimates from the UN, around 10 percent of the population in Norway lives below the relative poverty line. This is defined as those who earn less than 60 percent of the median income. Norway’s median income is around 45,830 kroner per month, according to Statistics Norway. 

READ MORE: Six apps to help you save money on your food shopping in Norway

Based on those numbers, those with incomes of less than 27,498 kroner can be considered to be in relative poverty. This figure may seem high compared to the poverty level in other countries, but Food Banks Norway writes that those in poverty in Norway still face adverse effects. 

“Poverty in Norway is not life-threatening, but you are at risk of both malnutrition and psychological problems,” it writes on its website. 

Furthermore, relative poverty also means not having access to the same standard of living as the rest of society due to their economic situation. 

For example, 4.5 percent of people in Norway can’t afford to replace ruined or worn-out clothing, while 3.6 percent of those over 16 would have difficulty paying for a dentist, according to Statistics Norway.  

Who is most likely to be in poverty in Norway

Refugees and immigrants with a non-western background are those most likely to be in relative poverty, according to Food Banks Norway

In 2021, a report from Statistics Norway also found that the number of children from low-income households was increasing. The report found that one in ten children lived in a household with a persistently low income. A persistently low income was a household that earned below the national median income for three years. 

Approximately half of these children from persistently low-income households were also from an immigrant background. 

Is poverty on the rise in Norway? 

Statistics Norway’s figures indicate that the number of children growing up in relative poverty is on the up. 

People in Norway are also feeling the squeeze due to rising inflation and energy prices. A report from the analysis institute Consumption Research Norway (SIFO) at Oslo Metropolitan University concludes that one in three homes in Norway have worse finances now than they did in January this year.

The ability to pay bills, interests and loan repayments is meanwhile cited as a problem for one in four of all households.

This is all in addition to the increased use of food banks in Norway.