"First and foremost: We at Nova Sea can contribute more tax to the community, and like an entire industry, we are signaling that we are also positive about contributing to the total tax revenue of 3.8 billion". This is how forceful the Norwegian company begins the section entitled 'Our proposals' included in point 2 of its consultation response to the proposed tax on ground rent in aquaculture. Before that, just two short paragraphs in point 1 explaining the background of the proposal, followed by a request for an extension. "Preferably, we want the tax to be introduced in 2024, and that we use the spring of 2023 for a thorough review of how a new tax can be set up", Nova Sea says.
After making it clear that it is not opposed to the community collecting more money, but to the way the government is approaching the implementation of this tax, the company based in Lovund, Northern Norway, brings a series of eight proposals to the consultation document. First, Nova Sea calls for a reduction in the total tax burden for the aquaculture industry, with a percentage upper ceiling. It also calls for a significant reduction in the percentage of ground rent tax and adjusted to the desired revenue. It also asks that the standard price be removed and replaced by the actual sales price achieved, "so that we do not risk paying tax on income we do not have", they say.
In addition, they state that development concessions should be included in ground rent taxation and that the negative basic interest tax must be paid and not carried forward. They also say that offshore farming should ensure repayment of negative ground rent. They then add that investments in the green shift should benefit from a special deduction in ground rent tax, regardless of the point in the value chain where the investment is made. And finally, they call for smaller companies to have "real protection from all different forms of ground rent tax".
Postponing the entire implementation would be, according to Nova Sea, the desirable thing to do, but if it is not the case, they offer a series of reflections to be taken into account after the consultation. The first of these precisely concerns the revenue calculation made by the government to propose a 40% rate. "Several different circles have calculated the total proceeds from the present proposal, and land on a proceeds far in excess of the government's estimate of NOK 3.65 or 3.8 billion", they say. "As long as the ministry does not want to make its calculations public, it is impossible to trace the reason for this gap between the various calculations, and why this is so different", they add.
The report they refer to – "Salmon tax challenges" (Jr y NC Consulting, 2022) – estimates the total collection at NOK 10 billion, which, according to Nova Sea, means that the tax rate itself must be reduced considerably. "We ask that the proceeds are quality-assured before any introduction of ground rent tax – and that the calculation be made available to the industry", they say. "Basic interest tax for the farming industry is set at 40%, without any kind of step-by-step escalation or alternative levels, and we feel that this tax percentage is set somewhat arbitrarily", they add further on, before recalling that several players in the sector have calculated that a basic income tax of 15% would already provide the desired revenue.
"Although it is the ground rent tax that is out for consultation, it is the total tax burden that contributes to us being extra concerned about our own and the industry's further development", Nova Sea assures. The company has recalled how the wealth tax has increased considerably in the last two years. "Our local owners are put in a position where they have to extract significant capital from Nova Sea in order to be able to handle the wealth tax. They thus become a major tax disadvantage for the company, which we would not have had with foreign ownership", they continue. "We cannot see that the total tax increases are consistent with the ambition to ensure continued diversity and local ownership in the aquaculture industry, as the Hurdal platform specifies", they add.
In its consultation response, the company also recalls that in the public discourse on ground rent tax, the aquaculture industry is often presented as a sector with a low tax contribution, so it explains its actual tax burden. "We pay corporation tax and employer's contribution like all companies in the private sector. In addition, there is property tax in municipalities that have adopted this. Separately for the aquaculture industry, there is the export tax, the production tax, as well as tax on the purchase of growth at a fixed price and the auction of licences", they say. "This means that the farming industry pays more in tax than the majority of Norwegian companies", they conclude. In their specific case, Nova Sea's total contribution to municipalities and the state from 2017 to 2021 was NOK 1.23 billion.
Finally, Nova Sea's response talks about the consequences that the proposal will have for them in the short and long term. Regarding the most immediate, among other things, the company highlights that it has frozen all major investments on land – "this means that 3.3 billion in investments have been put on ice until we know the structure of the ground rent tax", they say – and also that there are 100 direct and indirect jobs that will be postponed indefinitely. In addition, a month ago, they already announced that, as a consequence of the proposed tax, they will not renew 18 plant contracts.
As far as the long term is concerned, Nova Sea claims that they will have to redesign all their investments, from the planned slaughterhouse to the fish hatcheries. In addition, they assure that the 100 direct and indirect jobs planned will be much fewer and that they will have a reduced capacity to contribute to the ecological change. "Development in Nova Sea is stagnating", they say. "We do not have free capital to expand and develop further, as we have done in the past".
To conclude his presentation, Nova Sea also approaches the problem beyond the company itself, from a global national perspective. In their view, if the tax remains as it is now there will be less product processing in Norway, fewer Norwegian owners in the aquaculture industry, and less venture capital and development capital in Nordland and Norway. Furthermore, the company recalls that various governments and professional circles have outlined a future multiplication of value creation from the seafood industry. All these visions are based on the premise that several challenges related to fish welfare, environmental impact and feed raw materials will be solved, and the industry has invested heavily in R&D to do it.
"We fear that this development will stagnate as a result of the proposed tax regime, and Norway will lose its leadership position in terms of aquaculture technology and expertise. Foreign players will thus be able to take over the supplier market, and very important ripple effects in coastal Norway will disappear. As a result of a significantly lower rate of innovation, production growth in Norway will also be hampered", they end.