The Faroese government has presented a proposal to its parliament that seeks to adjust the archipelago’s revenue tax on the salmon-farming industry beginning in 2023.
Its proposal includes three key revisions to the current revenue tax system, which was originally introduced in 2014.
In a filing with the Oslo Børs, Faroese salmon producer Bakkafrost stated that the planned changes are:
- Increasing the number of applicable tax rates from three to five;
- Increasing the salmon price thresholds that determine when each tax rate is applicable;
- Linking the salmon price threshold to the average production cost for the Faroese salmon industry, which will be assessed annually.
The current law calculates taxes owed using the spot price value of the harvested fish, but the new law will determine tax thresholds based on the average annual production cost for the Faroese salmon industry. Currently, an average production cost of DKK 39.15 (USD 5.14, EUR 5.26) per kilogram will be applied in 2023.
However, if passed by parliament, the proposed change would mean that the revenue tax rates will be:
- 5 percent if the salmon spot price is less than DKK 39.15 per kilogram;
- 5 percent if the price is between DKK 39.15 and 44.15 (USD 5.80, EUR 5.94) per kilogram;
- 5 percent if the price is between DKK 44.15 and 54.15 (USD 7.11, EUR 7.28) per kilogram;
- 5 percent if the price is between DKK 54.15 and 69.15 (USD 9.08, EUR 9.30) per kilogram’
- 10 percent if the price is above DKK 69.15 per kilogram.
The proposal follows a similar move by the Norwegian government recommending a new 40 percent resource rent tax on salmonid farming operations with effect 1 January, 2023. Norway’s Finance Ministry estimated annual proceeds from the new tax of between NOK 3.65 billion and NOK 3.8 billion (USD 336.4 million and USD 350.3 million, EUR 344.4 million and EUR 358.6 million), with the plan to distribute half of these to municipal coffers.
Like the Faroes, Norway’s proposal needs to be approved by its parliament (Storting). If adopted, the marginal tax rate on farming of salmon and trout will rise to 62 percent. The proposal has caused considerable concern in the industry, with several major salmon-farming firms announcing a freeze in investments.
“The proposal is undoubtedly hostile to the industry,” Lerøy Seafood Group said in a statement. “If approved, it will have a strong negative impact on the entire industry, unless decision makers at the ‘Storting’ and people along coastal Norway manage to stop the proposal following the ongoing consultation period.”
Photo courtesy of Bakkafrost
