October 6, 2022

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Norwegian politics, the Nett på . case

Norwegian politics, the Nett på . case

Internet is at the heart of the matter These are the comments written by Nettavisen Editor-in-Chief.

The Norwegian state benefits greatly from Putin’s woes in Europe, and is also so greedy that it is demanding a 25 percent value-added tax on high electricity prices from its citizens and Norwegian businesses.

The simplest step the government can take for ordinary people and their workplaces is to abolish the value-added tax on electricity and internet rent. It will cut electricity costs by 20 percent overnight.

The issue of justice is crucial for the country to stand together in this crisis, German Chancellor Olaf Schulz said as he lowered the value-added tax to seven percent from the current 19 percent.

Germany will reduce the value-added tax on electricity from October 1 to March 1, 2024.

In Norway, Finance Minister Trygve Slagsvold Widom said that Norwegian electricity subsidies will continue throughout 2023, but it does not prevent the price that consumers have to pay in southern Norway several times higher than before.

Furthermore, the state demands a value-added tax of 25 percent on electricity and internet rent.

This is how electricity becomes more expensive

As is known, electricity in southern Norway is much more expensive than in the north. In addition, electricity is exempt from VAT in Finnmark.

The Smarte Penger website has a calculator that shows What you get as compensation through Existing Support (misleading name because this is the money I actually paid).

If we assume an average price of NOK 3.90 per kWh, the net price is NOK 1.44 per kWh after compensation. – Four times the normal price of electricity in recent years.

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In plain text: First, state and municipal energy companies make huge profits from electricity. Then the state demands a value-added tax of 25 percent on top!

So the price of electricity is before VAT, which increases the price of electricity by 25%:

Net price after electricity compensation: 1.44 NOK

+ VAT on electricity (25%): NOK 0.36

= Real price after subsidy and VAT: 1.80 NOK

Do you like Germany, Gahr Støre!

During the party leader’s debate in Arendal, Prime Minister Jonas Gahr Store said it was Putin who was wreaking havoc in Europe, not the markets. This is true, but it is indisputable that the state is making electricity more expensive by adding fees.

His party colleague in Germany, Chancellor Olaf Schulz, is devastated by Putin, and at the same time he has the highest price increase in 40 years. However, he chose to lower the value-added tax on energy from 19 to 7 percent, which would make Norwegian gas much cheaper for German consumers.

There is nothing to prevent Norway from lowering the value-added tax on electricity in southern Norway to the same level as in Finnmark – zero!

(Obviously the argument for eliminating incentives to save electricity is nonsense with the prices we have for electricity now.)

A number of other European countries have followed suit: Belgium, Spain, the Czech Republic, France, Italy, and Spain, to name a few.

Huge revenue for the state

In July it was consumed 4.2 billion kilowatt-hours In so-called public supply (where energy-intensive industry is omitted).

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If we use the example from the Smarte Penger calculator as a basis, the country collects 36 øre per kWh in VAT.

Therefore, rough calculations indicate that the state treasury in the calculations of people’s salaries and corporate income was NOK 1.5 billion in value-added tax on electricity in July alone.

This comes on top of huge revenue from gas sales to Europe and energy sales to Norwegian consumers and businesses.

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Go straight ahead without listening to ordinary people

During the party leader’s debate, Prime Minister Jonas Gahr Store and Finance Minister Trygiv Slagsvold-Widom reasonably made it clear that they would not introduce an electricity price cap or a better electricity scheme for ordinary people.

It’s somewhat reminiscent of the old kids rule of moving forward, no matter what you’re up against. The effect is that the locomotive apparently runs on the rails, while the selection wagons are off course.

As commentators praised Jonas Gahr Store for his clarification, voters listened to the prime minister who clearly didn’t want to do anything about the electric bill.

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Removing the value-added tax on electricity will adjust the price increase

There is no doubt that the state can afford to put the value-added tax on electricity to zero until March 2024, in the first place.

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This reduction will reduce the electricity bill of ordinary people and businesses by 20 percent immediately.

(Explanation for it being 20 percent: Given that something costs 100 and you add VAT, the price becomes 125. If you subtract 20 percent, the price goes back to 100.)

The reduction will also directly and indirectly reduce price increases in Norway, as companies will not have to pass the bill on to their customers by raising prices.

In any case, there is no reason to worry about the state treasury, and cuts to the value-added tax will not destroy the government’s ability to use oil money in the state budget either.

If we’re to use slightly ugly words, Norway is undoubtedly the biggest beneficiary of Europe’s energy war.

But we do not need to put an additional tax on war profits for this reason.

Here are several online cases about electricity prices:

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Red light for billions in electricity subsidies for private companies

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Oil companies get more electricity subsidies than ordinary people – and electricity is sold cheap

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Politicians have the money for better electricity subsidies – it’s just a matter of will

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Why do economists cry for the state when corporations and ordinary people are bleeding?