Norway Should Tax Salmon Farming Harder, Commission Says

(Bloomberg) -- Norway, the world’s biggest salmon producer, should take more of the profits from fish farming by introducing a new natural-resource tax, a government-appointed commission said.

The Conservative-led coalition set up the commission last year after the opposition pushed for the state to take a larger slice of the profits from Norway’s biggest export industry after oil and gas. But it’s unclear how the government will act on the advice after most of its member parties have come out against such a proposal.

Salmon farmers including Mowi ASA, the world’s biggest, fell in Oslo trading.

The majority of the members on the commission, led by economics professor Karen Helene Ulltveit-Moe, proposed creating an extra 40% natural-resource tax based on farmers’ profits. The commission also recommended eliminating the property tax on fish-farming facilities, according to a statement on Monday.

The new levy would provide tax revenue of about 7 billion kroner ($770 million) a year, although that figure should be expected to fluctuate, the commission said. A natural-resource tax would come on top of Norway’s regular corporate tax of 22%.

Norway should consider the history of its oil industry when deciding on how to tax fish farming, a business that is expected to grow in the years ahead, Ulltveit-Moe said during a press conference at the Finance Ministry on Monday. Petroleum production has had a resource tax from the start and has helped Norway build a $1.1 trillion sovereign wealth fund, the world’s biggest.

“How would the Norwegian welfare state have looked without that wise choice,” Ulltveit-Moe said.

Norway currently has extraordinary natural-resources taxes on oil and gas production, as well as hydropower. Such taxes are typically based on economic activity tied to exclusive rights to use geographically-bound natural resources. Norway’s fjord-ridden coastline is one of few environments where conditions are ideal for salmon and trout farming.

A minority of the commission’s members opposed the recommendation and mostly favored keeping the current framework for the industry. Finance Ministry Siv Jensen gave no indication on how the government intends to proceed, but noted that several of the parties had come out against a resource tax, including her own Progress Party. The government will now hold a public consultation on the report over the next three months.

Stocks Fall

Mowi fell as much as 3.1 and was down 2.1% as of 11:35 a.m. Grieg Seafood fell 1.6%, Norway Royal Salmon fell 2.4%, while SalMar fell 1.5% and Leroy Seafood Group 1.2%.

A new tax would represent about 2.1 kroner a kilogram of salmon and trout produced, according to Pareto Securities AS.

“Although it is negative for the salmon farmers in Norway if such a tax is implemented, we see it as unlikely that this will be implemented with the current government as all parties in the government have stated that they are against such a tax,” the broker said in a note to clients. “After the election in 2021 this can of course change.”

Norway produced 1.1 million tons of Atlantic salmon in 2018, more than half the global supply and almost twice as much as Chile, the second-biggest producer, according to Mowi ASA.

Oslo-listed salmon farmers have seen spectacular gains thanks to higher prices and restraints on supply over the past years. That growth has slowed in the last year amid a retreat in prices.

To contact the reporter on this story: Mikael Holter in Oslo at mholter2@bloomberg.net

To contact the editors responsible for this story: Tasneem Hanfi Brögger at tbrogger@bloomberg.net, Stephen Treloar

©2019 Bloomberg L.P.