| Summary: | This paper reviews tax policy initiatives and the scope for further reform in Norway. Norway faces the challenge of containing expenditure to at least avoid future increases in the tax burden, which is already above the OECD average. The favourable tax regimes for some industries imply that the fully taxed sectors carry a comparatively higher burden, distorting resource allocation. Norway has made considerable progress in easing the distortions that are typically associated with a high tax burden. The introduction in 1992 of a dual income tax system, taxing all capital income at a low flat rate and labour incoming at higher and progressive rates, has been the centrepiece of the reform process. However, the wide difference in marginal tax rate between imputed labour and capital income of self-employed and small business owners has prompted extensive tax planning by these groups. Moreover, the differences in the valuation of assets for the wealth and property tax leads to distortions ..
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