Democracy and Welfare Society

Finances

All employees who earn more than the minimum standard deduction per year pay taxes. Most of the taxes go to the municipality where the employee lives, and some to the county authority and state. Old-age pensioners and people on unemployment benefit and other national insurance benefits also pay taxes. Businesses mostly pay taxes to the state.

We also pay an indirect tax to the state on all goods and most services we buy. This indirect tax is called value added tax (VAT). The standard VAT rate is 25%, while it is 15% for food. This means that a percentage of the price you pay for an item is a tax that is paid to the state. VAT is an important source of revenue for the Norwegian state. More than 20% of the total tax revenues come from VAT.

It is a precondition for a functioning Norwegian welfare system that as many of the country’s inhabitants as possible are in work and able to contribute to the system by paying taxes. The state’s income must be greater than its expenses.

The state is responsible for some of Norwegian society’s social benefits and services, for example running hospitals. The municipalities are responsible for most of these benefits and services, however.

Facts

Taxes and duties

  • The Norwegian welfare state is primarily financed through taxes and duties.
  • Income from taxes and duties is necessary to ensure enough money for social benefits and for the welfare state to function.