Tax policy for the future

This memo identifies five problems in Norwegian tax policy that provide reduced incentives for investment, and proposes five concrete solutions to these problems. The problems and solutions are:

1. Problem: The corporate tax hits investments.
   
   1. Solution: Introduce the investment deduction in the corporate tax.
2. Problem: The corporate tax hits mobile investments.
   
   1. Solution: Cut the corporate tax and increase the dividend and capital gains tax.
3. Problem: Companies move activity as a result of taxes.
   
   1. Solution: Reschedule the taxation of companies from activity to sales.
4. Problem: Some base rates are mobile.
   
   1. Solution: Tie base interest tax to where the location-based base rate is.
5. Problem: Start-up companies may need local investors.
   
   1. Solution: Introduce a rebate in the wealth tax for shares in start-up companies.

Based on the problems and solutions, the report establishes five principles for long-term tax policy:

1. Tax profits and not investments.
2. Be wary of taxing international investors.
3. Move more of the corporate taxation into sales.
4. Base rate tax must depend on where the base rate is based.
5. Tax policy should take into account that entrepreneurial capital can be local.

Investment and effective tax policy are the main part of this analysis. An important point is that investment-friendly tax policies do not have to be regressive. While the proposals for cuts in corporation tax were supposed to benefit those with higher wealth, the distributional effects could be offset by increased taxation of shareholders, sales and place-based base rate. Overall, it may thus be possible to introduce comprehensive tax reforms that provide increased investment and growth without contributing to increased inequality.

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