What do Norwegian companies pay in corporation tax? When news surveyed this in an article this summer, the answer was that Norwegian companies on average paid 11 percent of the annual profit in the period 2017 to 2022. The annual profit is a measure of profit, which shows what the business owners are left with after the bills have been paid. Corporation tax in Norway is initially set at 22 percent of profits. But a number of incomes are tax-free, the politicians have decided. In other words, companies have profits that are not taxed, news’s survey showed. The tax debate has caught fire several times in recent years. It also did so according to news’s case. Finn Kinserdal, who is head of the Department of Accounting, Auditing and Jurisprudence at the Norwegian School of Economics (NHH) in Bergen, was one of the critics. Finn Kinserdal at NHH. Photo: NHH Following news’s case, he and research colleague Aksel Mjøs have calculated the effective tax rate for Norwegian companies. Aksel Mjøs is head of department at NHH. He is a municipal council representative for the Conservative Party in Osterøy. Photo: NHH Their figures show that the median effective tax rate is 20 per cent and the average is 22 per cent. – news’s calculations may have other unknown variables that we do not have access to, but our methods are based on established economic principles, and the answer agrees well with previous experience, says Kinserdal to news. The figures show that the tax reform from 2006 seems to have hit quite well, Kinserdal believes. – Thus, the tax reform, which lowered the tax rate but gave fewer special deductions, has largely been successful. He adds that it is complicated to calculate what the effective tax is for companies. The difference between news’s and NHH’s figures is due to differences in the calculation methods (see fact box). The NHH researchers: Kinserdal and Mjøs have calculated companies’ effective corporation tax. In these figures, they have made additional analyzes for income that is not taxable, without the net result being particularly significant, according to Kinserdal. news: In the news article there are calculations of how much of the profits of companies are taxed. The starting point for this was to show how the tax system works out in practice, regardless of what the politicians have decided should be taxed. In this way, news could show that companies have large incomes that are not taxed. news’s and NHH’s calculations These are the similarities between the calculations: Both have linked figures for tax paid from the Swedish Tax Agency to the companies’ accounts. Both analyzes exclude oil and gas companies as well as hydropower producers due to land rent tax interference. Both analyzes have used figures for group accounts and aggregated figures for tax for the companies in the group. Both have only looked at companies that have made a profit overall for the period. These are the differences between the calculations: Unrealized gains and losses: NHH excluded unrealized gains and losses from the calculation. news included unrealized gains and other non-taxable income. Property companies: NHH has taken out property companies that use the accounting standard (IFRS). These have profits from unrealized increases in the value of properties. news has included these companies in the analyses. Effective tax rate: NHH: Tax paid in relation to profit before tax. news: Tax paid in relation to annual profit. Included companies: NHH: Only limited companies (AS and ASA). news: Also included housing associations, savings banks and foundations. • Handling of missing data: NHH: Excluded companies with missing or zero income for one or more years. news: Included companies even if they lacked figures for certain years. Profits without tax In news’s figures, annual profit after tax was used as a measure of profit, to show what the owners are left with after the bills have been paid. The NHH researchers used results before tax, as they believe that this gives a more precise answer. – We must look at what we pay in tax on a pre-tax result, says Kinserdal. Kinserdal believes that news’s figures underestimate the effective tax by including unrealized gains and tax-free income. Unrealized gains are that the values in the company have increased. Examples of such values that can increase are shares and properties that the companies own, but which have not been sold. Such values do not need to be taxed by the companies before they have been sold, i.e. realised. – In the accounts, both unrealized appreciation and losses are taken into account, while the tax authorities only tax realized gains. This can significantly affect the effective tax rate, but not overall in our analyses, says Kinserdal. In news’s figures, such gains are included to show the large income companies have that are not taxable. Part of what companies earn is not taxable income. Photo: Lise Åserud / NTB It makes sense that such income is not taxed, says Kinserdal. – Then companies will not have to pay tax for the increase in value of assets that have not yet been sold. – The politicians’ misguided difference NHH’s calculations to find the effective tax rate seem reasonable and give a more accurate picture of how much Norwegian companies pay in tax, says Eivind Furuseth. – There are significant differences between what is income in the accounts and what is taxable income, says Furuseth. He is a researcher and head of the Department of Jurisprudence and Governance at the Norwegian Business School BI. Researcher Eivind Furuseth at BI. Photo: William Jobling / news – How relevant is news’s mapping? – In terms of showing the effective tax to the companies, it is not that important. But it shows in a good way that some income that the ordinary “man in the street” thinks is taxable income, is not, says the BI researcher, and continues: – Such as, for example, that gains and dividends on shares are basically exempt for taxation in Norway, while this will be income for accounting purposes. Furuseth adds that companies that have lost money before 2017 can deduct these losses from their taxable profits if they later turn a profit. This is called a carry forward loss. – It is the politicians’ misguided difference between the accounting rules and the tax rules that causes the differences, says Furuseth about the tax system. – I think it’s a bit strange that a good number of politicians don’t seem to understand this. Gains without tax An example of income that is not taxed is an increase in the value of property. In their own calculations, the NHH researchers have selected property companies that follow the accounting standard IFRS. This method of accounting counts the real increase in value as income. – Thus, unrealized value appreciation and losses are recognized in profit, says Kinserdal. news has included these companies in the calculations, to show that property companies have had large profits from value increases. This is not taxed, the politicians have decided. This also applies to private individuals. One of news’s tax cases showed that Norway’s largest property investor, Ivar Tollefsen, paid around NOK 8 million in company tax to Norway from 2017 to 2022. This happened in the same period that his Norwegian companies had billions in profits. Large parts of the profits came from value increases, which are therefore not taxed. Since 2022, things have gone worse with Tollefsen’s companies. He is now trying to sell a number of rental apartments. Once the sales have been made, the gain from the increase in value can become tax-free. Among other things, Finansavisen has shown that. In other words, housing associations can make money from property, without this being taxed in the current system. – It may not be right for the system to work like this, says Kinserdal. The NHH researchers have looked at how much property companies that account for unrealized gains have paid in tax on their profits. The figure they arrive at is approximately 5 percent. They have also investigated what happens to the overall effective tax rate, if the property companies are included. – It may only turn out 0.2 to 0.3 percentage points there. But there is no doubt from our side that property groups in Norway are taxed very favourably, says Kinserdal. Ivar Tollefsen is Norway’s largest housing investor. Photo: Fredrik Kampevoll / news The companies with “holes” The NHH researchers have looked at companies that have submitted accounts for the years 2017 to 2022. They have selected companies with holes in the figures. – It may turn out half a percentage point up or down on the effective tax. I don’t think that is where the difference lies between what we have done and news, says Kinserdal. Most of Norway’s largest companies are part of the group. Groups are companies that are organized under a common parent company as owner. news and NHH analyzed the companies in the group as one, i.e. as if they were one company. In the groups, profits can be transferred between companies. The fact that the companies in the group are viewed as a whole is very important for the tax calculations, says Kinserdal. He explains that the companies in the group can move tax positions between each other. – This is good. Then you get the same tax as if you had all the companies in one joint company. Calculating what that effect is for the group is quite complicated. I think we have taken some steps and made it happen, which perhaps news has not done, says Kinserdal. Published 27/09/2024, at 17.10 Updated 27.09.2024, at 18.38
ttn-69
The companies pay 22 percent – news Norway – Overview of news from various parts of the country
