Resource rent taxation in Norwegian salmon aquaculture : an economic analysis of resource rent taxation in Norwegian salmon aquaculture

Abstract

In 2018 the Norwegian government decided that a special tax commission should look into the possibilities to introduce a resource rent tax in the Norwegian aquaculture industry. In November 2019 the commission delivered their report with the majority proposal being that the government should introduce a periodized profit-based resource rent tax of 40 % calculated from a new special tax base called net resource rent income. In May of 2020 the Ministry of Finance discarded this proposal and instead proposed to introduce a production tax of 0,4 NOK per kg of produced salmon. The goal with this thesis is to research if there will be any changes in the economic behaviour of the companies if one of the tax proposals are introduced. To determine if there are any behavioural changes, I will create a bioeconomic optimization model that allows me to investigate the optimal rotation time before and after the introduction of the two tax proposals. My research suggests that both the proposed profit-based resource rent tax and the production tax will distort the optimal rotation time. In both cases the rotation time lengthens which means that it represents a decrease in the marginal value of continuing a rotation. The size of the welfare loss was relatively small; 0,35 NOK for the profit-based resource rent tax and 146,75 NOK for the production tax. Although, if the production area regulations are included in the calculations the companies will be forced to harvest the biomass before it has reached its optimal size. I find that the optimal rotation time will stay at 18,08 months for production area 1-9 and 20,96 months for production area 10-13 regardless of which one of the tax proposals that are introduced. In those cases, the introduction of the taxes will not change the economic behaviour of the companies.