It appears that the hard pressed, hard working, squeezed middle over in Norway are busily scrimping and saving to build up private wealth to provide themselves with something to fall back on in retirement and something to leave to their children etc etc:
Norway is moving closer to a housing bubble as the central bank’s strategy of cutting interest rates to weaken the krone spurs credit growth and bloats property values.
A day after Norway’s financial regulator said the biggest domestic threat to the economy comes from an overheated property market as borrowers bet rates will stay low, Norges Bank Governor Oeystein Olsen on March 14 demonstrated he won’t allow further krone gains by cutting the bank’s main interest rate a quarter of a percentage point to 1.5 percent.
The country may already be in a housing bubble, according to Robert Shiller, the co-creator of the S&P/Case-Shiller (SPCS20) home- price index who predicted the U.S. subprime mortgage crash. Policy makers should “start worrying now,” Shiller said in an interview in Copenhagen in January. Norway’s Financial Supervisory Authority this week told banks to build up their capital buffers to prepare for increased losses as low central bank rates continue to fuel credit-market imbalances...
The irony is that much of Norway's national wealth was built up by a very Georgist approach to collecting that self-same national wealth via the tax system (or not allowing national wealth to be dissipated and privatised or sold off to banks). Their entire sovereign wealth fund is merely all the taxes collected from oil extraction in their half of the North Sea (the bit which the UK generously/foolishly allowed them to call their own) and this is a large part (not being in the EU must have helped) of what has put them in such an enviable fiscal position:
The economy of the world’s seventh-largest oil exporter has steered clear of Europe’s sovereign-debt crisis. The government has no net debt and the biggest budget surplus of any AAA-rated nation, thanks to a $600 billion sovereign-wealth fund. Unemployment fell to 2.7 percent in February, Europe’s lowest rate, the government said on March 1. Norway, like Switzerland, isn’t a member of the European Union.
Do they not get it that land rents and resource rents are much the same thing? If they'd taxed land rents rather than incomes, that sovereign wealth fund might be twice as big and their economy would be in an even better shape. Taxing land rents acts like a much higher interest rate on land purchases alone, but affects nothing else, so even if they left their central bank rate at zero per cent all that extra liquidity would go into the real economy and not a speculative bubble.
As to dampening the value of your currency, that's easy, you just keep printing it and buying up other currencies until the exchange rate position reverses, and then you convert back into your own currency again, booking a handsome profit in the process.
Ah well.
Saturday 17 March 2012
One for Kj
My latest blogpost: One for KjTweet this! Posted by Mark Wadsworth at 22:13
Labels: Currencies, Home-Owner-Ism, Norway
Subscribe to:
Post Comments (Atom)
15 comments:
Having the NOK so high has meant that almost nobody goes to Norway unless they have to, and that the Norwegians drive into Sweden to do their regular shopping. Which makes it difficult to run business in Norway. So if they had proper LVT they could just relax, work short-time, and not worry about the lack of customers.
The fall in the NOK has taken down the SEK too so I took the opportunity to shift some cash before the UKP drops again.
Funny that N has not got LVT as they have it in Sweden though not as much as they ought to.
Lowering your currency is equivalent to giving your employees a cut in income.
AC1^2
Yeah, this interest cut was some strange move, but the central bank seems to have abandoned any responsibility for the property bubble. And we know that the govt aren't going to play their bit either (property is not to be touched as we remember the minister of finance said after the OECD bitched about this a little while ago). As to the method of devaluation, I have no idea why the CB goes down this route. Even the otherwise homeownerist press was a bit shocked by the interest cut. The corporate/labour unions are the only ones applauding this. Seems that they've recognized that their constituency are far more homeownerist than particulary worried about jobs in the secondary sector, so everyone is supposed to be happy now.
Phys: the swedish property tax is some pretty lenient sh.. A lot of property over the border has been bought up by norwegians as second homes, and since the swedish PT is capped at a certain percentage of income (4% I think), and the norwegians don't have income in Sweden, they get away with a minimum PT of a few thousand SEK, while happily driving up the prices for the locals.
Ph, Kj, thanks for background info. That 4% cap is way too low, 50% is more like it.
SB, it's a cut in profits as well, the NOK is stupendously overvalued and could do with taking down a peg.
Phys: I did some more research on Sweden, and according to OECD classifications of tax revenue in 2008, property taxes were 1,1 % of GDP in Sweden, actually lower than Norway at 1,2%, and much lower than the UK at 4,2%. So I don't see any reason to drum the LVT drum on Sweden's behalf...
MW: I was wrong, the Swedish PT is 0,75% of capital value, and as of 2008 the cap was set at 6000 SEK, not a percentage of income, which makes it more like a mini-council tax and has neglible revenue in the scheme of things.
Kj, those figures on "property taxes" for the UK are highly misleading. Business Rates is proper, full-on annual property tax, raises £25 bn; Council Tax raises net £20 bn, but half of that is the Poll Tax element, so the UK's total annual property taxes are £35 bn = 2% of GDP. Other stuff like Stamp Duty Land Tax on sales/purchases is not an annual property tax. No doubt the figures for other countries are just as misleading (might be wildly over- or understated).
Re Sweden: that sounds similar to Northern Ireland, where Domestic Rates is 0.7% - 0.8% on 2005 market valuations, payable per annum. But the market value is capped at £400,000 per home, so nobody pays more than £3,000 a year, and there is a roll-up option for pensioners. So even N Ireland is better than Sweden.
MW: I didn't consider that, that certainly explain why figures for Norway are noticeable, but these things tend to be similar in most of Europe don't they, most countries have stamp duty as well, so at least it's an indication. At least the figures does not support that the swedish state collects significantly more land rent than it's neighbour.
But the market value is capped at £400,000 per home, so nobody pays more than £3,000 a year
A reverse mansion tax in other words :)
Kj, taxes on land and buildings are very different in different countries, it's not like corporation tax or income tax where there are a lot of similarities. The UK figure is overstated, I know that in Germany the council tax is very, very low (about a third as much as UK council tax) and they do no have Business Rates on commercial land and buildings. I can;t comment one way or another on any other countries.
Yes, NI has a reverse Mansion Tax - but they still have Stamp Duty at savage rates for land sold for more than £500,000 or £1 million and they still have Inheritance Tax.
Surely a child of ten would see that it makes sense to get rid of the £400,000 cap and also get rid of Stamp Duty at high rates and get rid of Inheritance Tax? Then it's all nice and fair and simple.
"Council Tax raises net £20 bn, but half of that is the Poll Tax element,"
Indeed, you can't call council tax a property tax because it is paid by tenants too. Many people are paying council tax and don't have any 'property' at all, they effectively pay it on behalf of the actual owner. And SDLT is a transaction tax, it is paid on the exchange of land and liable to the purchaser, so you can't say that it is a tax on capitalised land rents *received*.
In other news, lots of people currently getting excited about the looming property crashes in Australia and Canada too.
Kj, taxes on land and buildings are very different in different countries, it's not like corporation tax or income tax where there are a lot of similarities. The UK figure is overstated, I know that in Germany the council tax is very, very low (about a third as much as UK council tax) and they do no have Business Rates on commercial land and buildings. I can;t comment one way or another on any other countries.
Good points, but aside from any taxation of imputed rents and CGT, the comparison is at least an indication of the degree of land rents collected. And my point was that the figures for Sweden (allowing that CGT belongs under another bracket, but probably doesn't collect that much), doesn't indicate that they collect significant amounts of land rents.
QP, even if Council Tax is payable by tenants (an administrative nonsense) it is still borne economically by landlords.
Kj, it is of course probably true that OECD figures are compiled consistently, so they include non-annual taxes in all countries. But what about income tax on rental income? Do they include that? I doubt it, but I'd have to look up their precise definitions.
Kj, it is of course probably true that OECD figures are compiled consistently, so they include non-annual taxes in all countries. But what about income tax on rental income? Do they include that? I doubt it, but I'd have to look up their precise definitions.
Agreed, probably not rental income, and I suspect not CGT either. Anyway, in the bigger picture, 1% of 4%, it's not dampening property bubbles and the private collection of land rents to any significant degree...
"even if Council Tax is payable by tenants (an administrative nonsense) it is still borne economically by landlords."
http://bit.ly/zVBqTf
QP, on an administrative level, it makes far more sense for it to be payable by the registered owner, which would improve collection costs from 98% to 99.9%, but that's not an economic thing.
Post a Comment