The Storting, economic rent tax and the Constitution of Norway

In the debate about the economic rent tax, we and several other lawyers have raised questions about whether this tax is in violation of provisions in the Constitution and key human rights. As we are now seeing a new majority proposal that challenges no less than three founding constitutional principles, it is appropriate to remind votes of such proposal that they may risk adopting an illegal statute.

Both the Constitution and the human rights set out frameworks for the Storting’s free access to provide laws. In other words, the Storting is obligated to avoid adopting legal provisions that violate the Constitution and human rights. Therefore, the Storing must assess the Constitution issue before they adopt the law. Such assessment is part of the work of the Committee that prepares the legal proposal for the Storting.

The Finance Committee in the Storting’s proposal for Economic Rent Tax on Aquaculture (legal part) was submitted on 23 May. The proposal has a separate chapter on «The relationship with the Constitution and the ECHR”. In this chapter, only the special question about the ban on giving laws retroactive effect is discussed, as the tax is adopted in May, but will apply from the turn of the previous year.

The Finance Committee does not deal with the other issues relating to violations of the Constitution and human rights that have been brought up in the consultation round and the debate about the economic rent tax. Therefore, in our opinion, the Finance Committee has not done its job. This article is intended as a supplement to the insufficient assessment from the Finance Committee.  

The proposal for economic rent tax challenges three important principles in the Constitution and key human rights. These three principles must be seen in connection with each other.

The first principle follows from Section 105 of the Constitution and first additional protocol article 1-1 of the ECHR. This principle stipulates that the state cannot deprive inhabitants of their property without full compensation. This principle sets an upper limit for the taxation – it is possible to tax values, but not to confiscate them. The economic rent tax is part of an overall tax and duty system for the aquaculture industry and calculations that we have done, after the tax rules were presented before Easter, show that some parties in the aquaculture industry may get a collective effective tax percentage of well over 100%. Here, we are getting close to the limits of the Constitution.

The second principle follows from Section 97 of the Constitution, which sets boundaries for the legislator’s access to change the future premises the authorities themselves have set to motivate investments. The significant tax change that the economic rent tax entails will have a highly unreasonable impact for some of the parties that have invested in the aquaculture industry in the confidence that the Government’s regulation of the industry was stable and predictable.

The principle of equal treatment follows from both the international convention on civil and political rights and the Constitution. As a starting point, the economic rent tax is based on an idea of equal treatment. The aquaculture industry is said to achieve an economic rent tax because they exploit shared natural resources. The Government can freely tax this economic rent without the aquaculture industry being able to claim that they are treated unfairly compared to other industries. However, some of the heaviest professional objections in the consultation and the debate on the economic rent tax revolve around the fact that the proposal for economic rent tax is based on erroneous and flawed assessments of the economic rent. If the economic rent is far lower than what is calculated by Statistics Norway, an economic rent tax that far exceeds the economic rent per year will result in unfair discrimination. Here, the tax proceeds’ size are naturally also significant. When the proposal was presented last autumn, this was calculated to be approx. MNOK 4, while it is currently calculated to be closer to MNOK 20 (15 if the rate is reduced by 25%). The probability that the economic rent tax will exceed the economic rent is therefore far higher than previously assumed – and this speaks strongly to the fact that there is an unjustified and unlawful discrimination of the aquaculture industry. Put in a simpler way: The Government is sailing under a false flag when the high tax is justified by returns from natural resources. The Government could do introduce this through a progressive corporation tax – but not by tax a specific industry with such a rationale.

As mentioned, these three constitutional issues must be seen in connection with each other. The problem is the large and unexpected tax increase that affects a specific industry with a flawed justification for the discrimination. Based on this, we conclude that it is highly likely that a decision on economic rent tax is unconstitutional.

In other words, the Storting representative who does not want to challenge the Constitution cannot vote in favour of the proposal for economic rent tax. The alternative is to ask the legal department to investigate the question as we have presented it here. Not just the limited and conditional assessment of Section 97 that has been carried out in this case.

This article was first published on

Experts in taxation and aquaculture law, Ulf Sørdal and Halfdan Mellbye

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