Norway announced it will raise taxes on oil companies by about 3 billion kroner (US$520 million) a year to damp cost pressures and overheating in western Europe’s biggest oil producer.
The Norwegian government will limit four-year exemptions on so-called free cash flow to 22 percent from 30 percent and raise the special petroleum tax to 51 percent from 50 percent, keeping a top tax rate of 78 percent, according to a presentation in Oslo on Sunday.
The increase comes as it also lowered overall corporate taxes to 27 percent from 28 percent, which will be financed by closing loopholes and corporate interest rate deductions.
“The changes will lead to an increased focus on costs in the petroleum industry,” Norwegian Minister of Finance Sigbjoern Johnsen said. “This can damp the pressure and cost increases created by the high activity level in the petroleum sector.”
Norway is starting to feel the pain from Europe’s debt crisis and the strengthening krone even as it struggles to absorb wealth from its offshore oil and gas production. This has split the economy, causing job cuts in traditional industries such as forestry production, as record investment offshore pushes wages and costs up nationwide.
The changes were met with immediate criticism from the oil industry. The largest producer in Norway is state-owned Statoil ASA. Other major producers off the Nordic country’s shores include Total SA, ConocoPhillips, Royal Dutch Shell PLC and BP PLC.
“Stability and predictability have been crucial for the competitiveness of the Norwegian continental shelf,” Erling Kvadsheim, an official at Norwegian Oil and Gas Association, an industry lobby group, said in an e-mailed statement. “The proposed changes will weaken this.”
Growth in exports will slow to 0.5 percent this year, down from 2.9 percent last year, Norge Bank, the country’s central bank, estimates.
Weaker growth prospects are feeding through to the labor market, pushing up registered unemployment to the highest since 2011.