Outgoing Finance Minister Sigbjørn Johnsen on Monday presented the red-green coalition government's national budget for 2014, before Prime Minister Jens Stoltenberg hands in his government's resignation.
In the proposal, the Norwegian Government proposes tax changes from 2014 to strengthen competitiveness and profitability, and stimulate investments in the mainland economy. The corporate tax rate will be lowered, the tax credit scheme for R&D will be increased and a special first year depreciation for machinery will be introduced. At the same time the Government proposes an interest deduction limitation for interest expenses paid to related parties.
The corporate tax rate will be lowered from 28 per cent to 27 per cent. The Government thus takes a first step in a broader reform of the corporate tax regime, aimed at reducing the rates and broadening the tax base. In March, the Government appointed a commission (the Scheel-Commission) to consider the corporate tax system in light of international developments, taking into account the coherence of the overall tax regime.
The Government proposes corresponding tax cuts on business income for self-employed and persons participating in partnerships.
Reduced tax rates on corporations and self-employed a.o. will reduce the tax revenue from mainland businesses by approximately NOK 3,3 billion.
The Norwegian economy continues to perform well, with economic growth near trend and low unemployment. However, a high cost level poses challenges for the trade exposed industries.
- In such a situation the Government stresses the need for fiscal prudence to support a continued stable development of the Norwegian economy, says Minister of Finance Sigbjørn Johnsen.
The Government proposes a Fiscal Budget for 2014 with a demand impetus of ¼per cent of Mainland GDP. The structural non-oil deficit is estimated at NOK135billion, equivalent to 2.9 per cent of the value of the Pension Fund Global and NOK 54 billion below the estimated real return on the fund, referred to as the 4 per cent path of the Fiscal Policy Guidelines. Taking account of the composition of the revenue and expenditure side, the budget is estimated to have a close to neutral effect on employment and production.
- Within the overall balance, the main priorities in the budget are to strengthen key welfare provisions and increase investments in transportation, says Minister of Finance Sigbjørn Johnsen.
Growth in Mainland-GDP is now forecast at 2.2 per cent in 2013 and 2.7 per cent in 2014, compared to an average annual growth of 2.6 per cent over the last 40 years. This year, growth is being slowed by 0.3percentage point due to a decline in hydropower generation, which represents the main source of electricity in Norway. The main underlying driving forces are household demand and petroleum sector investments. The labour market remains strong, with employment growth close to trend and an unemployment rate at around 3½ per cent. Employment is now 85,000 higher than at the peak before the financial crisis, supported by immigration.