The Norwegian economy has in the past four years experienced its strongest expansion since the 1950s. Recent developments, however, suggest that the cyclical peak has been passed, and the international financial turmoil has increased the uncertainty about the outlook for the economy.

In accordance with the fiscal guidelines, the Government proposes a Fiscal Budget for 2009 with a structural, non-oil budget deficit of NOK 92 billion. This is on par with the expected real return on the Government Pension Fund – Global, and implies an increase in the spending of oil revenues of NOK 14 billion in real terms.

This is the highest sum ever used from the oil income, and is aimed at stimulating the Norwegian economy during the ongoing economic crisis.

It was already clear from "leaks" from government ministers that there would  be more money for roads and railways, as well as health and education.

Also, the money spent on development aid will be increased by NOK 4 billion to a new high of NOK 26.2 billion. This means that for the first time Norway will reach the goal of using 1 per cent of the Gross National Product (GNP) for development aid.

More money will also be used on a program for renewable energy.

Taxes are always of interest, and here are the main proposals for 2009:

• A broadening of the tax base of the net wealth tax, including increased tax values for commercial real estate and abolishment of the 80-per cent rule that constrains the wealth tax for the very wealthy with low taxable income, combined with a considerable increase in tax-free allowances.
• Substantial increases in the allowances and reductions in the rates of the inheritance tax. At the same time, tax values of privately owned companies are increased.
• An extension of BSU, a scheme stimulating bank savings for young people who plan to buy their own home.
• Abolishment of a special tax exemption for a group of mutual insurance companies.
• Separation of technical installations in buildings into a new asset group for tax depreciation purposes. This will increase the depreciation rate on these assets from either 2 or 4 per cent up to 10 per cent.
• Adjustments in the motor vehicle registration tax, further strengthening incentives to purchase cars with lower CO₂-emissions by introducing a tax deduction for low emission cars (of up to NOK 11,000) and an excess tax for cars with emissions above 250 grams per km.
• An increase in the excise tax levied on non-alcoholic beverages.
• Increased tax on snuff tobacco.

(NRK/Press release)

Rolleiv Solholm

Written by Rolleiv Solholm