Salmon tax plan prompts SalMar to drop £20m capacity increase
Proposed 40% hit would have major consequences for investment decisions says company
Salmon farmer SalMar today blamed a proposed massive tax hike for a decision to abandon its plans to pay the Norwegian government NOK 244.6 million (£20.5 m) for the right to grow an extra 1,223 tonnes of fish.
In a market announcement SalMar – Norway’s second biggest salmon farmer after Mowi – explained that earlier this year it bought its relative share available for the capacity adjustment under Norway’s “traffic light” system.
On Wednesday, Norway's Ministry of Trade and Fisheries said that fish farmers who had bought increased permit capacity in 2022 would be given the opportunity to cancel the purchase, but must do so by October 6.
The traffic light system
The traffic light system designates Norway’s salmon production areas as red, yellow, or green, depending on what impact fish farming is judged to have on wild salmon in the areas. Farmers in areas with a red light must reduce production by 6%, while those in areas with a green light can increase production by up to 6%, although it's far from free: they must buy that capacity allowance from the government for a high price.
“SalMar has chosen to use the opportunity to terminate the purchase,” said the company, which co-owns Scottish Sea Farms.
“This is due to the resource rent tax the Government has now announced. The proposals involve, among other things, that the state acquires 40% of all cash flows in the company, and that the other owners’ share is correspondingly reduced. This is expressed by the total tax for aquaculture companies in Norway increasing from 22 to 62%. If the proposals were to be adopted, there would be major consequences for the company’s investment decisions and capital allocation going forward.
“This has created a situation which means that the company does not find it justifiable to pay the aforementioned remuneration. The government’s surprising proposal, without waiting for the recommendation from the government-appointed tax committee, has also led to an unpredictability on the part of the authorities which reinforces the need for a closer evaluation of the company’s future investment strategies.”