Taxing times for Norwegian salmon industry
Projects put on ice and refunds claimed for capacity increases after government reveals cash grab
Global salmon farming heavyweight Cermaq today announced that it was freezing investment in Norway because of the country’s proposed 40% tax on salmon farmers, but it is not the only fish farmer to do so.
Last week Nordlaks, which harvested 35,000 gutted weight tonnes in 2021, said it had stopped work on a new slaughterhouse, filleting factory and head office on Børøya in Vesterålen.
Nordlaks is also putting three large investments in land-based hatcheries on hold.
Together, these four investments amount to NOK 5 billion and would create hundreds of new jobs and major ripple effects in the local communities, said chief executive Eirik Welde.
'85% tax burden'
Since 2018, Nordlaks has invested over NOK 3.6 billion, mainly in new technology. That was 1.25 times more than the annual result in the same period. The investments have contributed to the increase in employment at Nordlaks by over 300, from 505 to 822. The increase in employment at Nordlaks’ supplier companies is assumed to be over 600 in the same period.
The government’s proposal does not involve any relief in company tax, wealth tax, dividend tax, production tax, property tax or any other taxes, said Nordlaks, adding that with today’s rates and the new tax on top, the tax burden will be 85%.
“For the next six-year period, Nordlaks had identified possible investments totalling NOK 7 billion. Going forward, we will have to go through all the investment projects again. When the national budget has been processed by the Storting (Norwegian parliament), we will know more about what can be implemented,” said Welde.
Explaining the consequences
The government’s proposal on the arrangement of the “resource rent” tax has been put out for consultation. During October, the committees at the Storting will start processing the State Budget, before it is adopted by the Storting during December.
“We fear that the proposal from the government will be met with a shrug of the shoulders from the rest of society and from the decision-makers in the Storting,” said Welde.
“Going forward, it is important for us to contribute to ensuring that as many people as possible understand the consequences of what has been proposed and then together with the other companies, we will propose changes before this is adopted.”
Nova Sea on hold
Nova Sea, which harvested 43,500 gwt of salmon in Norway last year, has also called a halt to projects.
Managing director Tom Eirik Aasjord said a new slaughterhouse at Lovund and a new hatchery, together costing NOK 3.3 billion, had been put on hold.
“The investments would lead to more than 100 new skills jobs and major ripple effects in the districts,” said Aasjord.
Nova Sea is also among companies that have chosen to rescind purchases of extra biomass under the government’s “traffic light” system that allows farmers to buy the rights to increase production.
Nova Sea paid NOK 53.4 m to increase production by 1% in June but has taken advantage of a government offer to change its mind and get a refund.
“Based on the government’s ground rent taxation (salmon tax), the value of the purchased fixed price does not reflect the actual value of the volume,” said the company.
Norway’s second largest salmon farmer, SalMar, has also pulled out of plans to pay the government NOK 244.6 million for the right to grow an extra 1,223 tonnes of fish.
The company, which co-owns Scottish Sea Farms, said the proposed tax had “created a situation which means that the company does not find it justifiable to pay the aforementioned remuneration”.
Another company, Emilsen Fisk, is also taking advantage of the refund opportunity.
“We have already begun to see the contours of what consequences [of the proposed salmon tax] will entail,” said Emilsen chief executive Tore Bratland.
“Investments worth many billions have been decided to be postponed in a few days, with the risk of cancellation. We have seen the first notices of possible redundancies for companies that have had large contracts for deliveries to the aquaculture industry cancelled. It is ordinary workers, in companies primarily located in rural Norway, who are now initially affected by the government’s proposal.”