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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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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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