Unease has spread in Faroe's salmon aquaculture industry with the news that the recently-elected Faroese government may raise taxes for salmon farmers later this year.
If approved, the new legislation would introduce nine tax rates for salmon producers, ranging from 0.5% up to a possible 20% depending on production costs. The maximum tax rate currently stands at 5%.
The Faroese government is currently in consultation with the salmon farming industry, with responses on the tax proposal due by 16 March. If approved, the new tax rates would come into effect from 1 August 2023.
The baseline for the new tax rates is taken as average production cost for 2021, set at 39,15 DKK (around 59 NOK/kg). In this way, a FishPool Index price exceeding around 119 NOK/kg would result in the maximum tax rate of 20%.
The proposal has already been dubbed Faroe's "salmon tax", after Norway's controversial ground rent tax proposals which are due to be voted on in the Norwegian Storting this spring.
At 20%, Faroe's proposed upper tax rate is half of that proposed by Norway's finance minister Trygve Slagsvold Vedum. Vedum's proposal has led to a slew of investments being frozen or abandoned while Norway's aquaculture industry awaits the parliament's final decision.
In January this year, Sjømat Norge (Seafood Norway) suggested that Norway's government could follow Faroe's model of land rent taxation. However, it seems that the reverse has occurred.
Rumours of the Faroese tax proposal began circulating in September 2022. At that time, Faroe Islands-based salmon farmer Bakkafrost released a statement noting that while it would not be affected by Norway's proposal, there was a possibility of increased taxation in the Faroes.
Bakkafrost is Faroe's largest producer of Atlantic salmon, with operations in both the Faroe Islands and Scotland, and stands to be among the hardest hit by the proposed tax increase.