The Norwegian tax rate on wages is higher than in the EU.

Last year, Norwegian families with children had a higher tax rate on wages than in the EU. The tax committee’s leader Ragnar Torvik will remedy that.

In 1789, the American statesman Benjamin Franklin wrote that “in this world nothing is certain, except death and treasure”.

And in Norway we are burdened by taxes more than many others in Europe, right?

Well…

The organization OECD has tried to compare the tax on wages in different countries (see fact box).

The answer is: Roughly speaking, the difference between Norway and the EU average is not very large.

Same tax for singles

Single people without children can mostly take it easy: according to the OECD study, Norway is not a high tax country for them. The tax rate on wages is roughly the same as the average for 22 selected EU countries.

The exception is singles with children and low wages. For them, the tax is much lower in the EU than in Norway, calculated including child benefit and others cash benefits cash benefitsMoney that is paid out by the state to citizens, for example child benefit.

In both the EU and Norway, the tax including such payments is much lower for singles with children than for singles without children. In Norway, extended child benefit provides for this.

Tax benefits with children in the EU

• For childless couples with two salaries around and below the national average, the tax percentage in Norway and the EU is the same.
• For married couples with children, tax is somewhat lower in the EU, but the gap shrinks with rising wages.

– In Norway, the tax on wages is largely individual, says Professor Ragnar Torvik at NTNU.

– Two people with the same salary will pay the same tax on their salary in Norway whether they are married or single. The partner’s income has nothing to do with the other’s tax.

He chaired the tax committee which presented its report in December 2022.

This does not seem to be the case in a typical EU country. Partner without income means lower tax for the other, who has income.

Torvik believes that the differences between Norway and the EU actualize the committee’s proposal for a new deduction in earned income.

– The deduction will give the greatest tax relief to those with low and medium wages. It will significantly reduce their tax rate, especially on wages up to NOK 700,000. The deduction also makes it more profitable to work, he says.

Many other treasures

There are many taxes and fees in addition to tax on wages. Income other than wages are important tax bases.

Taxes mean a lot: In Norway, VAT is the state’s most important source of income. It is a tax on consumption. The VAT rate varies between countries, as do excise duties on cars, alcohol and tobacco.

– Taxes and fees as a share of total value creation, i.e. gross domestic product, is the most used measure that sums all this up, says Torvik.

Measured in this way, the tax level in mainland Norway has remained stable at 43–44 per cent in the last 20 years.

In the last ten years, mainland Norway has been slightly above the average for the EU and the euro countries. The same applies in relation to Denmark and Sweden, calculated for the last few years.

But in Norway, around 17 percent of public expenditure is financed with money from the Oil Fund. This makes it possible for Norway to have a significantly lower tax level than the public service offer and the level of social security suggest.

Private or public

Tax and levy levels will largely reflect the scope of public services without deductibles. Put to the extreme, a country can choose between high taxes and free hospitals or low taxes and payment at the hospital.

In the former case, the tax percentage will be higher than in the latter case, while the hospital offer may initially be the same. The tax level only reflects the organization of the offer.

– However, the distributional effects will be completely different in the two cases. In Norway and many other countries, equality and equalization are the reasons why healthcare is free or with low deductibles. Then the tax will be higher, says Torvik.

The same applies to the choice between public and private social security systems.

Private social security savings through an insurance company shrinks the country’s tax rate. But at the same time, the authorities give up the opportunity to pursue economic equalization.