Pruds.no, 08.12.2019 — There is an increasing opposition to the 2019 proposal to move tax collection, tax control, and tax accounting from 227 offices located in local government units of LGUs (municipalities) to 56 regional tax administration offices (Skatteetaten offices) in Norway by June 2020. Among those that have advised against this reform is the association of tax collectors and municipal economists in Norway (Norges kemner- og kommuneøkonomers forbund), NKK, the Norwegian Association of Local and Regional Authorities (the municipal sector´s organization and development partner), KS, and the Norwegian Public Sector Trade Union, Delta. The latest group that has opposed the proposed reform consists of municipal mayors in 229 municipalities around Norway as of the 6th of December 2019. (See the list of these mayors in an article by Kari-Sofie Jenssen on the Web site of the Norwegian Union of Municipal and General Employees, Fagforbundet: https://www.fagforbundet.no/nyheter/a/10511/ordforere-protesterer-mot-nedlegging-av-skattekontorene/).
The question is: will the ruling political parties listen?
The Norwegian Parliament is set to vote on the proposed reform that would transfer the tax collection and control functions from the municipalities to the state, at the same time they would hold the final deliberations and approve the state budget for 2020. That takes place on or before the 15th of December 2019, so there´s still a chance to avert the approval of the said reform, even if this may end up to be a “David against Goliath” type of scenario. One problem that I see is: the biggest opposition parties, especially the Labor Party (AP), the Centre Party (SP), and the Socialist Left Party (SV), haven´t yet clearly expressed their stand with regard to this proposal. Thus, the last hope for the ”No” group may still lie in the possibility that the current ruling parties – the Conservative Party (Høyre), the Progress Party (FRP), the Christian Democratic Party (KRF) and the Liberal Party of Norway (Venstre) – will also listen to what the “No” groups say on the matter.
I still don´t get it why the major media companies and TV giants in Norway haven´t yet taken up this issue in their public debates. After all, the proposed tax collection reform will affect 227 municipal tax collection and control offices in the whole of Norway. NRK and TV2 as well as the largest local news organizations have used up much time, digital/paper- and air space on cases about American President Donald Trump, American politics and policies, events in Afghanistan, Syria, Russland, and even the case about Norwegian citizen Frode Berg who was imprisoned for two years in Russia and was released recently. Why can they not use a little more time to discuss and help the public to know and analyze a proposal that may put a dent on Norway´s current functional welfare system? Perhaps some of them want to surprise the Norwegian public with debates on this proposed tax collection reform in the next days before the final deliberations on the matter in the Norwegian Parliament?
Why the proposed tax collection must be stopped
Asbjørn O. Pedersen, Secretary-General of the NKK, points out the lack of new studies about the economic and social effects of a proposed tax collection reform that is slated to be approved this month and take effect on the 1st of June 2020. This is dangerous, he says, since there is a possibility the proposed tax collection reform can lead to tax income losses for the whole Norwegian society.
Pedersen writes in the article, ”Risky Reform,” published in the November 2019 issue of the magazine Kommunal økonomi (municipal economy) that today’s system is very effective, and the municipal tax collectors are important for good local financial management. He also underscores that minuscule reductions in the tax collection percentage that may arise from the proposed tax reform can wipe away the estimated gains associated with cost-savings that may come from cutting down over 100 man-years.
In another article “Local Efficiency,” also in the November 2019 issue of the magazine Kommunal økonomi, Pedersen uses the figures published in the Norwegian Tax Agency´s (Skatteetaten) annual report for 2018 to compare the efficiency between the municipal and national tax collectors: 99,85%, for the municipal-based collection of the payroll taxes against 99,58% for the centralized collection of VAT by the national government. Pedersen clarifies that the difference in these percentages may be almost minuscule, but this difference can amount to 2 billion Norwegian kroner.
I have mentioned in my article, ”Moving tax collection/ control from the LGUs to the Norwegian nat´l gov´t in June 2020: Too much, too soon,” published earlier on my blog site, Pruds.no, that bad timing may prevent the proposed reform to easily succeed as its proponents expect it to be. If this tax collection proposal were approved in the Norwegian Parliament in December 2019, it will take effect on the 1st of June 2020. This can create problems, especially for the municipalities that were just merged, in accordance with the municipal reform approved by the Norwegian Parliament on June 8, 2017. A major restructuring process has already started taking place in the Norwegian society as a result of this municipal reform – even if this reform were set to formally take effect on the 1st of January 2020. In addition to making necessary adjustments for this restructuring process that is expected to continue in 2020 and the following years, the merged municipalities would also have to work on other structural adjustments – including further changes in their 2020 budget, longer-term economic plans, legal agreements/contracts and activities related to tax collection offices as well as the set-up for the collection of municipal taxes and fees.
If the new tax collection reform would lead to an increase in tax arrears in 2020 and the years after that – as NKK has warned about, and which happened in Denmark after the implementation of a similar reform – then the municipalities, inhabitants, and the whole of Norway, would lose instead of gain from this tax collection reform.
According to the Danish National Audit Office, total tax arrears increased after the transfer of tax collection from the municipalities to the state in Denmark: from 14.8 billion Danish kroner (NOK 19.9 billion) in 2005 to 118 billion Danish kroner (NOK 158.8 billion) in 2018. If the current government in Norway wouldn´t look at this as a warning that the proposed tax collection reform might not be as simple as some people would claim it to be, and continues to turn deaf ears to the demand to undertake necessary newer risk assessments and socio-economic analyses before the government approves the proposal (as is the case this year), Norway might soon experience difficulties in sustaining its existing welfare society in the next few years, assuming all other things remained constant.
If the proposal were approved together with the state budget for 2020 by December 15, 2019, Norway could lose not only tax income (especially in the form of expected higher tax arrears) as early as 2020, but also good local expertise and proximity to taxpayers. As I have said before, it is easy to look at the difference in the accessibility of services that the citizens of Norway can get when they have access to 227 municipal tax collection offices versus access to only 56 regional tax offices. Closing down the municipal tax collection offices now or in the next two years isn´t an easily reversible process.
I hope the government, the opposition parties and the whole of Norway could manage to agree – just in time – that it is not right to kill the goose that laid the golden eggs.
