Salmon tax starts to bite

The so-called “ground rent tax” on Norway’s fish farmers is taking its toll, Vince McDonagh finds.

The great thinker Albert Einstein once said he found tax was the hardest thing in the world to understand.

It is a sentiment with which some of Norway’s salmon farmers today would probably agree.

The latest figures from privately-owned non-stock market listed companies show that the controversial ground rent tax on salmon farmers, introduced by the Labour-Centre Party coalition government two years ago, is seriously eating into profits with a consequential negative impact on investment.

Sinkaberg Hansen farm and barge

This was widely predicted at the time of the announcement but scoffed at by some commentators because the industry was doing particularly well.

Excuse the mixed metaphor, but salmon at that time was seen by politicians on all sides as one big fat cow.

While it would to be too much to say the industry is struggling today, things have changed – and not for the better.

Prices have slumped, non-tax costs have risen sharply, biological challenges have eaten into profits and become expensive to fix – and now most companies are facing considerably higher tax bills.

With a general election now just over a year away, tax is once again becoming a dominant issue among Norway’s salmon farmers and among many of its employees who depend on the industry for their living.

Refsnes Laks

Fish farmers feel the pinch
While aquaculture may not swing the result of next year’s election, it is expected to have an important influence.

The cost of living, which did it for Britain’s Conservatives in July, is still the dominant domestic issue in Norway and is threatening to be a problem for Labour.

The Conservatives and its right of centre partner, the Progressive Party, are riding high in the polls and are tipped to form the next government, since Norway today is rarely governed by a single party.

They have promised to abolish the tax although they are still likely to replace it with something else.

That is for next year. Of more immediate concern is the effect the tax is having on the industry today and it is not good.

The Alsaker group, for example, which is the main company of Alsaker Fjordbruk, had an operating profit of NOK 1.1bn (£80m) in 2023. But its tax costs more than doubled from NOK 259m (£18.5m) to NOK 579m (£41m) and the group saw its profits coming close to being halved. This has meant some £27m less for possible investment, the company said.

Alsaker operates four smolt plants, 24 food fish permits and a slaughterhouse, along with other facilities.

Another company, Refsnes Laks, paid NOK 99m (£7m) in taxes last year, of which NOK 62m (£4.5m) was ground rent tax.

Ellingsen Seafood worker

The family run business Ellingsen Seafood increased its turnover by NOK 302m (£21m) but was saddled with an additional ground rent bill of NOK 75m (£5.3m) along with an increase in other taxes.

Figures from the major companies such as Mowi, SalMar and Leroy will come later in the year, but their tax share is certain to be even higher.

Finance Minister Trygve Vedum of the Centre Party is unrepentant and believes that the warnings two years ago about mass bankruptcies were exaggerated.

Trygve Vedum

He told the financial news website E24 that warnings about “robbery of the coast”, “lights going out along the coast” and “knife in the back against small businesses” were exaggerated.

“I think what we did was right,” he said. He may be forced to change his mind after next year’s election count.

Consultancy spend doubles
The tax has also brought other cost increases. A new report from the independent business group NHHS Consulting shows that the expenditure on consultancy and advisory services in the aquaculture industry has almost doubled after the Støre government introduced the salmon tax.

On average, the costs associated with external consultancy and auditing increased by 84% for the 13 aquaculture companies that took part in the survey.

Kristin Langeland

Seafood Norway’s Kristin Langeland said: “This was, among other things, what we warned against.

“The report from NHHS Consulting confirms the impression we have had that consultancy and bureaucracy costs have skyrocketed after the salmon tax was presented by Støre and Vedum in 2022.”

She added: “These costs come on top of the tax, the production tax, the property tax, the marketing tax, the research tax and the other taxes and fees that the industry pays.”

Martine Werring, head of tax at Seafood Norway, said that in the government online platform known as Hurdalsplattformen, it was stated that the government wanted to cut bureaucracy for business.

Martine Werring

Despite these promises, costs have increased considerably for the aquaculture industry, he argues.

“The Labour Party and the Centre Party were clear that they would cut bureaucracy if there was a change of government in 2021. Many believed in them, and they won the election. Now we see that bureaucracy and tax costs are skyrocketing. Here they have to clean up [the mess they made].”

Seafood Norway says that at Sinkaberg, a medium-sized family-owned farming company in Rørvik, costs almost tripled in 2023.

The company’s CEO, Svein-Gustav Sinkaberg, said: “The extra tax on the aquaculture industry that we have had imposed on us has resulted in a massive bureaucratisation and over-administration of a profitable coastal and district industry. We feared that this could happen but found that we fell on deaf ears when we warned of it.

Svein-Gustav Sinkaberg

“We have to pay tax, but the tax model and the total tax pressure the government has imposed on the industry is so great that it drains us of both capital and internal capacity that is tied up in reporting instead of creating value along our coast.”

Sinkaberg believes that the whole country will lose from increased bureaucracy and over-administration, adding: “We must regain trust in the government. We have to pay taxes, but we can’t have a tax bill and a ‘form empire’ that takes away our investment opportunities and desire.”

He added: “If we are to have vibrant coasts and rural areas in Norway, we need more than free ferries. We also need framework conditions that enable us to grow further and create more profitable jobs. Not just for us and our local environment, but for the whole of Norway.”

Erna Solberg visits a fish processing plant

The ground rent tax debate will continue until the general election next year and possibly well beyond it.

While the Conservative coalition remains ahead in the polls, the gap has narrowed in recent months, so Conservative leader Erna Solberg is not yet guaranteed a return to power.

But if she does win, will she replace the ground rent tax with something equally unpalatable to the industry?

Politicians might do well to take note of the comment from the 19th century US author Austin O’Malley who said: “Like shearing sheep, it is best to stop levying taxes when you get down to the skin.”