“Selling salmon is significantly different from selling oil”

Closeup of fresh Norwegian Atlantic salmon fillet. Photo: Adobe Stock.
Closeup of fresh Norwegian Atlantic salmon fillet. Photo: Adobe Stock.

Sjømat Norge (Seafood Norway) responded to the government's proposal of following the standard price council model of the oil tax in the salmon rent tax. "Selling salmon is significantly different from selling oil", they said in a letter to the Minister of Finance, Trygve Slagvold Vedum, and the Fisheries and Oceans Minister, Bjørnar Skjæran. The national association of the Norwegian fisheries and aquaculture industry appreciates the efforts made to find more reliable methods for determining revenues but has doubts that standard price advice based on a template from the oil sector is sufficient.

The oil sector proposal as an example

Following the November 18 meeting with Ministers Vedum and Skjæran at the Ministry of Finance, the government issued a press release stating that real income must be the basis for salmon rent tax, and also mentioning a standard price council as a possible alternative to set it. "We have good experience with a standard price council for the petroleum tax", Vedum said at the time.

Trygve Slagsvold Vedum, Finance Minister of Norway. Photo: Norway Ministry of Finance.

Sjømat Norge appreciates that the government so clearly states that real prices are the basis for taxation and that it is making efforts to find more reliable methods for determining revenues than the initially planned Nasdaq stock prices for salmon. However, for a number of reasons, they have expressed doubts that standard price advice based on an oil sector template is adequate.

Salmon production is not oil extraction

According to them, firstly, there is greater variation in product and quality. In addition, in the salmon market, there is also greater variation in contract types, with extensive use of fixed-price contracts that are extended over time. "It is our understanding that long-term fixed price contracts are not widespread in the oil industry and that long-term agreements are anchored in the spot price. Long-term fixed price agreements are the mainstay of much of the processing in Norway, as grocery chains etc. who buy processed products require long-term fixed-price contracts", they said.

Thirdly, Sjømat Norge has emphasized that the number of companies producing salmon is much higher than the number of companies extracting oil, and, therefore, there is a higher number of sales along the entire coast. "It will therefore require significant changes from the Petroleum Price Council to a corresponding standard price council for salmon", they concluded.

Finally, the Norwegian national association of the fishing and aquaculture industry has also pointed out that such a standard price council model would require significant administrative resources both from the authorities and from each individual company. "As all salmon producers will be covered, including those covered by the minimum deduction, all companies must develop their administrative capacity. For many of the smaller companies, this will require additional administrative work which will strongly stimulate sales or mergers", they claimed.

Continues the wager on real prices

"Sjømat Norge's clear recommendation is that the aquaculture sector in a possible new model for additional taxation be taxed based on the actual price they achieve for their product", continues the letter sent to the ministers of Finance and Fisheries and Oceans. In addition, as it did in the meeting with both ministers, the association again asks the government to consider the establishment of a transitional arrangement "that ensures a sound process, while at the same time the state will not lose expected tax revenues".

Undoubtedly, the determination of revenues is one of the several problematic aspects of the Government's proposal and perhaps the most challenging, which is why they are asking for prudence. "As the complexity is so great, it would be most prudent to follow general procedure and postpone the entry into force of the new tax until 1 January 2024 and thus until after the Storting has adopted the regulations. This will ensure that the companies know the regulations they are to be taxed according to at the time the regulations apply", they stated.

However, Sjømat Norge is aware that the government expects to have such revenues from 2023 and has therefore proposed an alternative. "In order to avoid the state losing expected tax revenues, as a transitional arrangement, the production tax can be increased for 2024, so that the government receives the expected revenue from the industry", they ended.

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