Norway proposes stricter oil tax rules in advance of elections

OSLO (Bloomberg) --Norway, Western Europe’s biggest oil producer, proposes overhauling how it taxes the companies that extract petroleum from fields off its coast.

The depreciation and uplift rules in the special tax for petroleum will be replaced by immediate expense recognition of investments, or cash flow tax, from 2022, Finance Minister Jan Tore Sanner told reporters in a snap press conference in Oslo. The changes are estimated to increase central government revenues by about 7 billion kroner ($810 million) over time for investments made in 2022.

“This is a change that will mean that the system will be a little tighter, but also neutral, and there will be good conditions for both Norwegian and foreign companies in the future,” Sanner said in an interview.

The changes call into doubt the stability of the oil industry’s framework conditions that form the foundation of the Norwegian fiscal system, just two weeks before a national election. Polls indicate that Prime Minister Erna Solberg’s incumbent government coalition will likely be replaced. While the two largest parties, Labor and the Conservatives, back the oil industry, the smaller parties that they will depend on to form a government are calling for an end to exploration.

The proposal will be sent for consultation within a week.