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LIFE IN NORWAY

How incentives have struggled to attract residents to north Norway

Despite perks like lower taxes, discounted student loans and cheaper energy, not enough people are attracted to live in the north of Norway, experts have said.

Published: 6 December 2022 14:48 CET

Pictured are homes on the shore in Tromsø.

Lower taxes have struggled to attract enough people to northern Norway. Pictured are homes on the shore in Tromsø. Photo by Sebastian Herrmann on Unsplash

Measures to attract people to live and work in northern parts of Norway have largely failed, according to a new report.

Lower student loans, income and employer taxes and cheaper energy have all failed to attract enough people and businesses to the region, the report commissioned by Vista Analyse and commissioned by the Ministry of Local Government and Districts found.

In 1990, measures were introduced in Finnmark and seven municipalities in north Troms to combat high unemployment and lower living standards triggered by a fishing industry crisis.

Despite the aim of the measures being to attract people to these areas, the population in the region where they were introduced has actually shrunk over the past 30 years. In 1990, 94,000 people lived in the area. Since then, the population has declined by around 1,200.

“In real money (terms), the incentives have become less important to people. Over time, the measures have also lost interest in the news. They are ‘just there’ and are not very motivating,” Håkon Vennemo from Vista Analyse told public broadcaster NRK.

Local Government and District Minister Sigbjørn Gjelsvik also acknowledged that the measures no longer had the desired effect.

“The feedback I get from North-Troms and Finnmark is that the measures are appreciated but that there is a desire for them to be reinforced and more targeted,” Gjelsvik told NRK.

The report recommended introducing several measures, such as increasing child support and lowering taxes on second homes in the area. It added that discontinuing the exemption from energy tax and using the money saved to improve other incentives.

Tarjei Jensen Bech, county mayor in Troms og Finnmark, said that the report’s results weren’t surprising and proposed measures such as an extra week of holiday and ensuring that residents feel the north, where large parts to the east border Russia, feel safe and secure.

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EXPLAINED: The incentives to attract people to northern Norway

In the last two decades, the number of births in northern Norway has fallen by 35 percent, and the situation is most dire in the Finnmark and Nordland counties.

A 2021 survey among 1,500 young people in southern Norway aged 20–40 showed that only 3.6 percent considered moving to northern Norway.

It is no surprise, then, that the Norwegian state has tried out a broad range of support measures to get people to stay – and thrive – in northern Norway.

While these measures haven’t had a major effect, they have been broad in scope, ranging from lower income tax to investments in transport and reforms in health and education.

But what is the current incentive framework for people who want to move – or stay – in northern Norway?

The action plan was introduced in 1990 to combat high unemployment and a collapse in the local fishing industry.

The Finnmark and Nord-Troms action zone

Many state incentives related to attracting people to northern Norway are aimed at young people.

Furthermore, these measures target Finnmark and Nord-Troms, which are particularly affected by depopulation, by categorising them as an “action zone.”

As Troms og Finnmark County points out on its website, this zone aims to “create an attractive region to live, work and run businesses in.”

The zone includes all municipalities in Finnmark as well as the municipalities of Kåfjord, Skjervøy, Nordreisa, Kvænangen, Karlsøy, Lyngen and Storfjord in Nord-Troms.

The benefits of living in the action zone

So, if you have a residential address and place of work in the action zone, you’ll be eligible for several financial advantages.

Some of the most prominent are tax cuts. As the authorities point out, special rules apply to the tax on ordinary income for taxpayers in Finnmark and Nord-Troms. Residents pay a base-rate of 18.5 percent on their income tax rather than 22 percent, which amounts to around 20,000 kroner less in taxes for somebody earning the national average income.

Along with that, electric power supplied to households and public administration in the action zone is exempt from electricity tax.

Businesses in the action zone pay a reduced fee for power supplied, and there is also no VAT on electricity supplied in the area. Furthermore, there is also an exemption in place regarding employer’s tax.

Parents – and prospective parents – are also incentivised to pick northern Norway to start a family. From August 1st, 2023, nursery places are set to be completely free of charge in Nord-Troms and Finnmark. The Norwegian government predicts that this will save families around 60,000 kroner per year.

If you’re a student, you have good reason to consider getting your education in the north of Norway.

If you live in Finnmark or some municipalities in Troms, you can have a part of your student debt – up to 20 percent of the original loan base, limited to 30,000 kroner a year – written off from the Norwegian State Educational Loan Fund (Statens lånekasse for utdanning).

Just know that you must live in the action zone continuously for 12 months to apply to get your debt reduced.

How much can you save through these incentives?

What does this actually mean in terms of potential savings?

According to a rough calculation from Troms og Finnmark County, a family consisting of two adults and two children can save up to 160,000 kroner a year.

The calculation assumes the full effect of student loan write-downs ( 30,000 x 2 = 60,000 kroner), daycare savings for two children implemented on August 1st (60,000 kroner), and an ordinary income tax deduction for Finnmark (20,000 x 2 = 40,000 kroner).

On top of this, a family in the action zone would also benefit from the exemption from electricity tax for households.

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