Proposed resource rent taxation for the Norwegian aquaculture industry (“grunnrenteskatt”)

NCE Seafood is a cluster consisting of a lot of competent partners and members, that operates within the seafood industry. They gladly want to share their knowledge and competence with our cluster and the seafood industry. Lately, we have heard a lot about the Governments proposal of “grunnrenteskatt” for the Norwegian aquaculture. We asked our new partner EY if they could share some of their insight of the proposed resource rent taxation. Gaute Ebeltoft, Partner EY Tax & Law, shares the intention and current status of the proposed “grunnrenteskatt”.

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Photo: Morten Wanvik
Text: Gaute Ebeltoft

The Government appointed in 2018 a committee to assess how the tax system for the aquaculture industry should be designed. This was in order for the society as a whole to take part in what is generally believed to be extraordinary returns from the natural resources used in the industry. At the same time, the tax system should be designed in a way that allows the industry to undertake profitable investments. The committee considered both the introduction of a resource rent system and a production fee system.

The members of the committee were split (6-3) in their proposal presented on 4 November 2019. The majority proposed a resource rent tax of 40 percent of a special tax base called the “resource rent income”. This tax will be in addition to the ordinary Corporate Tax of 22 percent of the corporate profits. The proposed taxation model is designed similar to the implemented resource rent taxation on hydropower enterprises in Norway, and will be a profit based, periodic tax where investment cost deductions are distributed over time through depreciations. A special income deduction (‘’friinntekt’’) will be allowed when calculating the resource rent tax. This deduction is meant to compensate the cost of not being able to deduct investment costs as they arise.

The majority also proposed that the current auction-based system of new aquaculture licenses should be upheld. Lastly, they propose that that the existing property tax on fish farming installations, in addition to the sector specific export duty, is removed.

The minority consider the current auction-based model in regard to expanded production capacity to be an adequate tool to procure resource rent tax. Should the growth within the industry decrease, the minority suggest that a moderate production fee is implemented to secure future tax income from the industry.

Currently the political climate seems unfavorable to the proposed resource rent tax. However regardless of the political climate, the debate on taxation of the aquaculture industry is likely to continue in the years ahead.

 

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