Why a new tax proposal could hit Norway's travel industry hard
A new tax proposal which would see transport, accommodation and cultural activities become more expensive could be disastrous for Norway's tourism industry, experts have warned.
On Monday, Norway's Tax Committee presented its ideas for a shakeup of Norway's tax system.
Its report suggested a flat VAT rate on all goods and services, including transport, accommodation and tourism activities. The proposals have been met with a lukewarm reception from the tourism industry.
"It will dramatically change the competitive situation of Norwegian tourism. It will be more expensive in general in Norway, but we will also be at a significant disadvantage against our European competitors," Ole Michael Bjørndal, director of business policy at the Norwegian Hospitality Association (NHO Reisliv), told Norwegian broadcaster TV 2.
The new flat rate of 25 percent would double the VAT on flight tickets, transportation and ski lifts. Bjørndal has said this would lead to more people holidaying in Sweden as the VAT on tourism-related activities there is six percent.
"If it (VAT) increases to 25 per cent, it will be considerably more affordable to holiday in Sweden than in Norway. It will worsen the situation of Norwegian hotels, which are already struggling to fill up the beds, especially in the low season. There is no room for a price increase, then there will be less demand," Bjørndal said.
He added that the proposal went a fair distance to ensure that Norway becomes a less attractive destination.
The committee said that the flat VAT rate would pay for increased welfare in Norway. Currently, the proposals from the committee are just suggestions and have not been formally adopted by the Norwegian government.
While the proposals from the Tax Committee have yet to be adopted by the government, Norway has previously signalled its intent to tax tourists more.
A potential tourist tax could be included in the budget for 2024 as part of the agreement for the fiscal plan for 2023. These plans are separate from Tax Committee's proposals.
While the government is in the early stages of formulating a tax on visitors, it could come in the form of extra tax levied on hotel stays, souvenirs and tourism activities.
Proposals to pass some of the maintenance and cleaning costs on to tourists have appeared several times in recent years, most recently in the political agreement on which the current government was formed in October last year.
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On Monday, Norway's Tax Committee presented its ideas for a shakeup of Norway's tax system.
Its report suggested a flat VAT rate on all goods and services, including transport, accommodation and tourism activities. The proposals have been met with a lukewarm reception from the tourism industry.
"It will dramatically change the competitive situation of Norwegian tourism. It will be more expensive in general in Norway, but we will also be at a significant disadvantage against our European competitors," Ole Michael Bjørndal, director of business policy at the Norwegian Hospitality Association (NHO Reisliv), told Norwegian broadcaster TV 2.
The new flat rate of 25 percent would double the VAT on flight tickets, transportation and ski lifts. Bjørndal has said this would lead to more people holidaying in Sweden as the VAT on tourism-related activities there is six percent.
"If it (VAT) increases to 25 per cent, it will be considerably more affordable to holiday in Sweden than in Norway. It will worsen the situation of Norwegian hotels, which are already struggling to fill up the beds, especially in the low season. There is no room for a price increase, then there will be less demand," Bjørndal said.
He added that the proposal went a fair distance to ensure that Norway becomes a less attractive destination.
The committee said that the flat VAT rate would pay for increased welfare in Norway. Currently, the proposals from the committee are just suggestions and have not been formally adopted by the Norwegian government.
While the proposals from the Tax Committee have yet to be adopted by the government, Norway has previously signalled its intent to tax tourists more.
A potential tourist tax could be included in the budget for 2024 as part of the agreement for the fiscal plan for 2023. These plans are separate from Tax Committee's proposals.
While the government is in the early stages of formulating a tax on visitors, it could come in the form of extra tax levied on hotel stays, souvenirs and tourism activities.
Proposals to pass some of the maintenance and cleaning costs on to tourists have appeared several times in recent years, most recently in the political agreement on which the current government was formed in October last year.
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