Atlantic salmon: Norway is the no. 1 farming country in the world. For how long will it last?

A new resource rent tax system for sea farmers is suggested by a special tax commission. The environment may suffer together with the seafood  industry.

The new system, if introduced, will hit the profitability of sea-based marine farming by levying an additional 40% tax on resource rent income exceeding certain levels. The new tax will be added on top of the 22% general corporate income tax and the specific auction fee for new, indefinite fishing licences. An excise duty is suggested to substitute the special aquatic production plant tax (not exceeding 0.7%), as well as the marketing and research duty on the FOB (free-on-board) - value of the exported seafood (not exceeding 1.05%).

China has chosen the opposite approach – Chinese seafood businesses pay only half of the tax as the general industries. This advantage is expected to strengthen the competitiveness of Chinese businesses trying to satisfy an increasing global demand for fish. China is the largest consumer of Atlantic salmon. However, the Chinese domestic salmon production has still decreased (FAO, "The state of the world fisheries and aquaculture", 2018). Thus, China is expected to increase salmon imports. In 2018 China lowered the customs duty on fresh and frozen salmon fillets from 10% to 7% for most favored nations by treaty (“MFNs”). Norway is an MFN.

Transportation also plays a major role when operating global industries like marine harvesting. The operating profits of a Norwegian seafood transporting company might be considered tax exempt under the Norwegian Tonnage Tax regime. It is, however, a provision that each and every vessel of the company has been sailing 30 nautical miles or more per trip, during a period of 9-12 months of a fiscal year. It is a requirement that the company is solely deriving profits by way of certain financial activities or transportation, limiting the use of bareboat chartering. Another condition is that the company holds at least one vessel registered for more than 100 tons.

Complementary, China levies a tonnage tax on the net tonnage of every vessel entering domestic Chinese ports from foreign ports. The tax level is determined by net tonnage (four brackets, the highest rate applies to net tonnage exceeding 50,000 tons), the terms of the tonnage tax certificate, and whether or not the flag state is an MFN like Norway. However, the beneficial tonnage tax system will not outweigh the effects of a heavy natural Resource taxation.

Seafood is one of several limited resources which need protection against over-exploration. Sea farmers (fisheries in particular) are deemed to achieve extraordinary profits on the cost of the community by consuming jointly held resources. The new ground rent tax suggestion is part of a new trend aiming at distributing the benefits of these resources more efficiently.

Nevertheless, the suggested tax regime is expected to hit seafarmers severely. The Norwegian Labour party fears extensive layoffs amongst seafood producing businesses upon the introduction of such a regime. A major concern is the potential investment aversion experienced in other natural resource-based industries, such as wind power and hydropower. Worst case (for the environment as well as the expected fiscal proceeds) is maybe a totally tax-motivated misallocation of income and expenses between land-based and sea-based operations.

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