Tax Free

Taxes, skat (pronounced “scot” in Norwegian), are the life-blood of the Norwegian social system.  They generate enough cash to give all their citizens things they can actually see and benefit from like free healthcare and higher education, guaranteed retirement, and roads throughout the land.  I know Americans don’t have as many direct benefits from the taxes we pay, but then again, 55% of Americans don’t pay any federal tax at all.  In Norway, even the little old ladies on a minimum pension still pay 10%.  Surprisingly, though, there are some in Norway that pay no taxes whatsoever, but it comes with a price.

The Svalbard Islands lie in the Arctic Ocean very near the top of the world and they belong to Norway.  Norway recently created an ice vault there to house samples of all the world’s grains and seeds, just in case there are people left after an apocalypse that want to grow food.  Norwegians are forward thinkers.  But they are also smart in realizing not many people want to live that far north, so if they do, they pay no taxes to the government.  It’s Norway’s only tax-free zone.  Still, there’s no line up of people who want to move there.

Way up north, on the mainland of Norway, wage earners only pay a flat 10% income tax for the same reason.  The government doesn’t want everyone living down south or only in cities, so this is how they create incentives to keep people in the locations they consider a “hardship.”

Norway also has many “hardship” jobs as well, so they compensate workers through the tax code.  For all those that work on oil rigs in the North Sea, they only have to pay a flat 10% tax, rather than the 36% everyone else pays.  Even those employed by the Norwegian ferry system, Hurtigruten, just pay 10% tax because their shift is three weeks on, three weeks off, and that’s considered a hardship.   Nearly all jobs in Norway are union jobs and those unions know how to negotiate.

There are a few other tax-free sources of income available in Norway and many people take advantage of them.  Rental income is taxed at normal tax rates, unless the place that’s being rented out is located in the taxpayer’s home, then it’s tax free money.  I guess the politicians feel if you are so desperate for extra cash that you’d rent out a room in your house, you shouldn’t have to pay taxes on it.  Most people just build a small apartment in their basement which helps pay their mortgage.   

But with their 26% sales tax, no one in the country gets off totally “scot free.”