- Small savers hit harder than rich ones - NRK Norway - Overview of news from different parts of the country

The mother of the small children, Jenny Lund, lives in Meissen in Østfold with her husband and three children. She is a leader MoneypennyIt is Norway’s largest economic network for women.

The network has 42,000 members on Facebook – and aims to give women more confidence in financial matters.

Jenny has worked fewer hours over the years to spend more time with the children when they were small. It is a conscious choice.

He knows he wants to have a minimum pension, so has been saving a little every month in mutual funds for years – to be in old age.

But if gains from a day’s savings are taken out of the account, she will have less left over. For the red-green government, the tax on savings has increased by nearly 20 percent in the one-year and two-year state budgets.

All indications are that the proposal will win a majority in the Storting.

The government’s pro-government party, SV, is outnumbered by Labor and the relevant Center Party “Take the rich man”. And the rich, they own stocks. If anything, the stock tax will be even tougher after SV says.

About tax on Norwegian savings and shares and funds

During the last two state budgets, the Red-Green government has increased the tax on dividends and share income from 31.68% to 37.84%. In effect, the state takes 19.4 percent more of what people earn from their equity savings now than they earn in 2021.
A tax increase, for example, affects the extra savings people on a defined contribution pension make through their pension provider, with future gains eventually withdrawn.
The dividend tax hike came into effect immediately in connection with the presentation of the national budget, avoiding tax reforms. Formally, a stock tax cannot be adopted unless a majority of the Storting supports it.
The government’s preferred budget partner, the Socialist Left Party, supports the share tax increase and may demand that it be higher, if anything.
The tax hike affects all individuals who earn money now or in the future by selling individual stocks or shares in ordinary mutual funds and mutual funds with an equity stake of more than 20 percent. Or receive dividends as an individual.
Gains on shares and funds held in share savings accounts are taxable in the income year in which the gain is withdrawn from the share savings account.
In comparison, the tax on interest income from bank savings and interest funds is 22 percent.
According to Vff’s census from the summer of 2022, 44 percent of Norwegians held shares in open-ended equity funds. Open-ended mutual funds are ordinary mutual funds where no money is tied up.
At the end of 2021, 856,441 people held shares in Norway. That’s a 30 percent increase since the stock savings account was introduced in fall 2017.
The Equity Savings Account Scheme was intended to encourage equity savings and facilitate long-term savings in stocks and funds.
By the end of 2021, 1.5 million employees in the private sector had defined contribution pensions. Of these, more than half a million had a minimum plan, where the employer pays 2% of salary as an annual pension.
Sources: Statistics Norway, Table 06959, NOU 2022:7, Census 2022, Verdipapirfondenes forening, Swedish Tax Agency, SV, NRK

But Jenny didn’t feel very rich.

– In a sense, it actually hurts those who have less money. Because where should they put the money to grow? What products are they? Where is it? It is a fund. Tax hikes hit small savers harder than the wealthy, he says.

– Do you think the government is greedy?

– Yes absolutely. I think it’s greedy to take such a large portion of the pie. It seems that there is a rush to take the rich. Then Jenny says people forget there is such a thing as small savers.

– While trying your best to protect yourself and save money. He says you can keep your income consistent with savings in the bank.

But that is not the case. Tax on interest income from bank savings is 22 percent. At the same time, the government wants to raise the share tax to nearly 38 percent with immediate effect.

– After all, they must feel cheated, who went to the stakes, as suggested by the politicians that they should. “I have to say I’m surprised,” says Thor Johnson, professor emeritus at the Norwegian School of Economics in Bergen.

He believes the sharp increase in share tax is very unfortunate and is surprised Labor can support it – as it creates uncertainty in the economy about what the government might bring next.

Labor did not have an opportunity to be interviewed on the matter before the weekend and was referred to the Finance Ministry for answers.

Finance Minister Trygve Slaksvold Vedam said the main point of the tax increase was to make those with more pay more. Instead of how hard the line actually hits, he measures the increase in percentage points.

– We don’t want to take the rich, the point is that people with strong backs should contribute more. So, we have increased the dividend tax by approximately 6 percent. We offer a tax cut for everyone who earns less than NOK 750,000. For example, a household where both earn approx. After 500,000 you get a tax relief of around NOK 8,000. This is a priority, says the Vedas.

The Finance Minister also indicated that the government will continue with the Individual Pension Savings Scheme (IPS) which provides tax exemptions on pension contributions. But it is a more flexible savings plan compared to mutual funds. Under the red-green government, the annual maximum savings amount has also been reduced from Rs 40,000 to Rs 15,000.

– But don’t you understand that when you increase the dividend tax you are hitting everyone, mutual funds, most combination funds? Almost 1 in 2 now save in mutual funds, and if they take profits from their stock savings accounts, the government offers 20 percent more profits than a year ago.?

– There’s no doubt about the distributional benefit of what we’re doing when we give tax cuts to everyone making less than 750,000. It has a very clear distributional profile, and large dividend income for the state comes from absolute high income earners. They have to pay more taxes. And then not 20 percentage points, but 6 percentage points, you can get a sense when you ask that question, says the finance minister.

Thor Johnson at NHH has been one of the driving forces in the development of finance as a research object in Norway for decades. He is referred to as a legend in the Finsavisen industry and counts as much as NRK.

– When ordinary people are relying on saving in stocks for their future lives, it’s cruel if you raise taxes that way, says Johnson.