A lot of expats express a state of shock when informed about the tax level in Norway. On an ordinary income this is generally 28 percent. “How do they get away with that?"
: rosenkilden.no
After a while a lot of the same expats don’t mind. We appreciate the individual views on tax policies and which model of taxation one finds better than the other; however there’s an explanation behind every system.
The Norwegian tax system is based on the principle that everybody should pay tax according to their means and receive services according to their needs. The public sector in Norway is charged with major tasks to serve the interest of the population, including a public health system under which everyone is entitled to treatment, the right to education and major tasks in several other areas. The taxes that we pay are spent on public services such as healthcare, hospitals, education, transport and communications. In addition to covering joint expenses, taxes are designed to contribute to greater equality between individuals.
A distinction is drawn between direct and indirect taxes. Direct taxes comprise income tax, that is, tax deducted from our earnings from employment or business activities, interest on bank deposits etc. and wealth tax.
Indirect taxes are sometimes used as instruments to reduce our use of products that are hazardous to health or the environment. Many indirect taxes also relate to consumption. Value-added tax (VAT) is an example of this. It is a tax that we pay when buying goods and services. It means that an amount of what we pay is in turn paid to the public purse.
In Norway income tax and wealth tax are direct taxes. Income tax is paid directly as a percentage of income; whereas wealth tax is a tax on things you own, such as a house, bank deposits etc. Taxes are paid both to the state and the local municipality. In addition, a premium is paid to the social security system to finance public hospitals, medical treatment and various social benefits.
