– I actually think the proposal for a new salmon tax is embarrassingly bad. If the exemption limit is not changed, no one will pay basic interest tax in 3–4 years. This is what investment director at Nordea, Robert Næss, tells news. He is one of around 350 who have submitted input to the government’s proposed salmon tax – referred to as a basic rent tax – before the deadline expired on Thursday night. The basic interest tax for the aquaculture industry means that 40 per cent of the profit must go to the state. This tax is in addition to the corporation tax of 22 per cent. This means that the activity that takes place in the sea will be taxed at 62 per cent. Therefore, the government wanted to shield the smallest breeders from the biggest tax burden, while the big ones would take the brunt. That limit, the minimum deduction, must be set somewhere between 4,000 and 5,000 tonnes of MTB. – The biggest companies get the biggest tax burden. Everyone will benefit from the bottom deduction, but the larger the company, the greater the effects of the tax, said Fisheries Minister Bjørnar Skjæran when the proposal was put forward in September. It is the activity that takes place in the sea that triggers ground rent tax for the farming industry. Here from one of Salak’s locations in Troms. Photo: Øivind Arvola Split the company – avoid the salmon tax Næss, on the other hand, believes that this limit may seem counter to its purpose. There is because he believes the advantages of ending up below the free limit are greater than the disadvantage of organizing in this way. He presents an example: – You can sell salmon for up to NOK 400 million a year without paying ground rent tax. If Per and Jens own a company that together sells salmon for NOK 800 million, you can avoid ground rent tax by splitting the company in two and each owning a separate part, writes Næss in the input to the consultation. This reduces the total tax burden from 62 per cent to 22 per cent, while at the same time more than doubling the result after tax, he writes further. Comparing with hotels Næss also believes that the very largest breeders in Norway will adapt their companies to avoid paying ground rent tax. Because in practice it is only the ownership of the cages that triggers ground rent tax. This has already led to several farming companies such as Mowi, Lerøy, Cermaq, Grieg Seafood placing the salmon concessions in their own companies, writes iLaks. Robert Næss is investment director at the bank Nordea. Photo: Nordea – If you create a dozen companies with different owners, and you keep production below 5,000 tonnes, none of them will have to pay ground rent tax, says Næss. At the same time, the large companies will be allowed to use the cages as they do today, i.e. put down fish, feed, slaughter and sell as before. – The only difference is that those who now own the cages must have a return. He draws a parallel to the hotel industry, where the hotel chains rarely own all the hotel buildings, even if they operate them all. – If the proposal is not changed, it will only be a short time before the proposal is so eroded that no one pays the tax. The ministry: No intention to split up State Secretary Lars Vangen (Sp) in the Ministry of Finance writes in an e-mail to news that they will not comment on any of the consultation input until a final bill is presented to the Storting. When it comes to splitting up companies, Vangen writes that only one minimum deduction per group has been proposed. – Then there will be no purpose for the largest companies to split up into smaller units. Rules are also established at owner level, so that companies owned by the same person and their close relatives only get one basic deduction. Lars Vangen (Sp) is State Secretary in the Ministry of Finance. But Næss believes it is entirely possible to circumvent this limitation. – What the ministry has ensured is that if I own the company alone, I cannot avoid salmon tax by dividing the company into Fisk 1 and Fisk 2, and still standing as the owner of both companies. This means that a company with a 20,000 tonne permit can split the companies into five, keep one part for itself and sell the other four parts to investors. – It is not inconceivable that someone would sell to acquaintances and give seller credit. This means that the buyer does not need to have as much money and then they pay the money they receive in annual compensation as installments. In practice, the new owners will then be straw men. This is how the ministry responds news has asked the ministry whether it is possible to get more than one basic deduction if companies are split up and these are bought up by independent investors. State Secretary Lars Vangen (Sp) responds as follows: – In the proposal for legal provisions in the consultation memorandum, it is proposed that a basic deduction of between NOK 54 and 67.5 million in deduction value be given for companies in the same group and for related parties. – The group definition is designed so that a parent company together with a subsidiary constitutes a group where the parent company represents more than 50 per cent of the votes in the subsidiary. – The same applies where a subsidiary alone or together with several subsidiaries or the parent company owns so many shares or shares that together they represent more than 50 per cent of the votes in the company. – Rules have also been proposed at owner level which mean that where an owner, alone or together with one or more close relatives, owns so many shares or shares that it represents more than 50 per cent of the votes in two or more companies or parent companies, they must also be considered a group. – The ministry will assess the issues in more detail in the light of the input in the consultation. Economists: Drop the minimum deduction Næss is not alone in thinking that the exemption limit should be removed. When the Norwegian Fisheries Tax Committee presented its recommendation for the tax model in 2019, it was without a minimum deduction for the industry. Nor did the Tax Committee recommend such a free limit when they presented their report in December. Statistics Norway (SSB) writes in its consultation response that they are critical of the minimum deduction. They believe that it can have a distorting effect on competition and can contribute to reduced efficiency. Rather, they propose to remove the entire exemption limit and introduce a lower tax rate for everyone. Economics professors Guttorm Schjelderup and Petter Bjerksund at the Norwegian School of Economics (NHH) also believe that the minimum deduction is not well justified by the government. Petter Bjerksund is professor of economics at the Norwegian School of Economics (NHH). Photo: NHH They have, on their own initiative, submitted a consultation response to the government – and believe that having a floor deduction which means that the small salmon farmers are exempt from ground rent tax is a bad idea. – It has been said that it should be large listed companies, with a large degree of foreign ownership, that should pay the most ground rent. But that is not a good academic argument, says Bjerksund. Facts about ground rent tax for the aquaculture industry Effective rate of 40 per cent. Applies to the production of salmon, trout and rainbow trout. A floor deduction of 4,000-5,000 tonnes ensures that only the largest players pay ground rent tax. To apply from 1 January 2023, the government proposes. Will provide between 3.6 and 3.8 billion annual tax revenues. The income must be distributed equally between the state and municipalities. The proposal has been submitted for consultation with a deadline of 3 January. The proposal has been submitted for consultation and not adopted. (Source: NTB) – It is said between the lines that some should be able to pay the tax, while others should not. They believe that the free border will mean that the companies will work intensively to make the most of the scheme. – The minimum deduction provides financial incentives to reorganize or scale down the business in order to come under the minimum deduction. This is what we call a “lesser degree of economic efficiency”. Economics professor Guttorm Schjelderup at NHH has, together with colleague Bjerksund, come up with input for the new salmon tax. Photo: news Sjømat Norge: Positive for bottom deduction The managing director of Sjømat Norge, Geir-Ove Ystmark, says that they are in favor of a bottom deduction despite the fact that they are against the government’s proposal for a salmon tax as it stands today. – We have noticed that many academics are negative about the minimum deduction. But we as an organization are positive about minimum deductions. – The economists believe that it is possible to reorganize the companies so that you get more bottom deductions and thus lower basic interest tax. Do you think the industry will adapt to the tax system to pay less tax? – I have no opinion on how the companies will adapt to the tax system. Geir-Ove Ystmark is managing director of the interest organization Sjømat Norge. Photo: Frida Brembo / news – Several large farming companies are now transferring their licenses to their own companies. Why do you think they do that? – I think it is to put the activity that must pay salmon tax into a separate company and keep the activity that does not have to pay salmon tax out. You get cleaner lines. – We see that the proposal has already led to significant changes in the companies and an incredible amount of money has been spent on legal assistance to carry out such processes. – Do you think the breeders are preparing to split up the companies in order to get more bottom deductions? – No, I do not think so. I think it is to differentiate between companies that get different tax systems. Breeder: Fears dilution of ownership On the island of Lovund on the Helgeland coast, Jacob Palmer Meland runs the family-owned breeding company Lovundlaks. Jacob Palmer Meland is the general manager of the family-owned farming company Lovundlaks on the Helgeland coast. Photo: Lovundlaks With permission to have 5,938 tonnes of fish in the sea (MTB), they are over the limit to get a bottom deduction. But if they had split the company in two, they would have come under the proposed exemption limit. It has never been the intention to do so – until the land rent tax was proposed. – It is not unreasonable to think that one should create company structures and arrangements that split up the industry in order to create more bottom deductions and make other structural adjustments when only one link in a long value chain is subject to a special tax. That is why the company has now reversed itself in the matter of minimum deductions, from being for to being against. Although they are in favor of a model that taxes companies of different sizes differently, they also believe that the industry will adapt to the tax system. – There is a risk that real ownership will be fragmented in the financial and ownership environment to create more bottom deductions, while breeders become operators out in the rural areas. The Minister of Industry: The tax is coming. Minister of Industry Jan Christian Vestre (Ap) tells news that they take all input and feedback in the consultation round seriously. – If there are proposals for adjustments to the facility that can make this better and more efficient, then I am absolutely sure that the Minister of Finance will listen to it. Jan Christian Vestre is the Minister of Business and Industry Photo: Tale Hauso / news But he sweeps aside all doubts about whether ground rent tax will become a reality. – It is coming, it is right and it is fair, and it will contribute to continued high investments and great profitability in this industry in Norway and that is good.
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Experts believe that this move could mean that salmon farmers can avoid ground rent tax – news Nordland
