Norway has embraced electrification so much so that more than 90 percent of all vehicles sold there in August were electrified. Now, however, the tax policy that has encouraged the nation’s EV buying spree may change.
The country‘s next government is expected to be a center-left alliance that’s likely to be led by a Labour party candidate. That party has vowed to introduce a graduated tax system on expensive EVs. Although all-electric vehicles would still have no tax levied against them for the first 600,000 Norwegian crowns ($69,882 USD), any amount over that would be taxed at 25 percent.
A Porsche Taycan, for example, which starts at 777,000 Norwegian crowns ($90,621), would incur 44,250 Norwegian crowns ($5,160) in taxes on the 177,000 Norwegian crowns ($20,643) it costs above the tax threshold. The Labour party says that this policy is made out of a sense of fairness.
“It is a subsidy. And… the more expensive the car is, the bigger the subsidy,” Svein Roald Hansen, a Labour party tax policy spokesperson, told Reuters. Many have called it a luxury tax, and it is by no means unique. Other nations with less aggressive EV policies, like Canada, offer greater subsidies for less expensive EVs so as not to favor the rich, who need less help buying a new car.
“We have in the last couple of years received a lot of new models… there is plenty to choose from for those who still want to buy a car while there is a VAT [value added tax] exemption,” Hansen argued.
The idea follows the publication of a paper by the International Monetary Fund, which argued that it was time to add a tax to expensive EVs in the country. It claimed that Norway‘s blanket tax exemption cost the government 19.2 billion crowns ($2.24 billion). Money raised by a luxury tax, it argued, could be funneled into other environmental policies.
The Norwegian EV Association, however, argues that this is a bad time to mess with one environmental policy (the EV tax break) in favor of another whose outcomes are unknown.
“Now finally the more rural areas are starting to buy more electric cars and it’s not the time to remove the tax exemption because we need to also get these areas with higher market shares,” Christina Bu, a spokesperson for the association said.
