Nova workboard

a blog from young economists at Nova SBE

Norwegian real estate tax – who does it benefit?

As the municipal election just has been arranged in Norway one of the ”hot” topics have been the implementation of real estate tax. In Norway each municipality are able to decide if they want to implement real estate tax or not, and the level of the tax. Today 355 out of 428 municipals (83%) in Norway have introduced this, and the number has been increasing slightly for each year. [1]

One of the main reasons to why politicians implement real estate tax is that they believe investing in real estate is favoured compared to other capital goods[2]. According to the law for capital tax, you would pay more tax if you have an amount of cash in the bank, shares, and funds, then if you invest in property. This as a result of the valuation method, which is different. But is it fair to compare the ability to own your home, to the ability to invest in shares? According to my view, and the general physic need for a human, I would say that it’s not[3]

The capital tax in Norway was reduced in 2014[4]. This tax is for the ones that have capital above a given level. This led to a decrease in the income for government and municipal, an income loss that needs to be recovered from other areas.[5] The reduction of capital tax was given under the argument that the capital tax is preventing necessary investments in the Norwegian industry. So, is real estate tax a better then the capital tax?[6]

Well, as a result of the benefits of owning property a lot of investors have made big money with buying, letting out or/and selling property. A side effect from this is the increasing prices for properties, and in particular in Oslo. This again makes it harder for “normal” people to buy their first home. So, an increase of the costs for owning a property may be helpful to prevent the huge increases in property prices, since it is no longer that attractive for pure investing. On the other hand – is the cost big enough to give an effect for the big investors, or do the real estate tax only hurt the ones that already are vulnerable to an increase in expenses?

In my opinion – the answer is both yes and no. I am afraid that the real estate tax may hurt the ones more sensitive to an increasing costs compared to the capital cost, in a way that makes it harder for them to make an investment in living. At the same time it can be an important tax due to preventing the increasing property prices in Norway, which makes it harder for young people to enter the housing market.

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Author: studentnovasbe

Master student in Nova Sbe

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