Norway will not harmonise its value-added tax (VAT) legislation for cross-border power sales with the EU despite pressure from market operator Epex Spot, with the country's finance ministry claiming that its current rules are "satisfactory", it told Argus.
Norway's finance ministry has not "found any reasons" to consider better integrating its VAT procedures on cross-border power sales, the ministry said, adding that EU rules are not "binding" and that, as such, "there is no ongoing work" to align the Nordic country with the broader European market.
The decision follows a series of letters sent by Epex Spot that highlighted its significant objections to the existing VAT arrangements. The market operator argues that the system allows for potential double taxation on some sales while others can go completely untaxed. They added that this increases the risk of VAT tax fraud in Norway, with the system "leav[ing] the door open to well-known tax fraud methods", Epex Spot's public and regulatory affairs director, Davide Orifici, told Argus last year.
In response to the ministry's statement, Epex Spot told Argus that while the legislation "is not binding for Norway", it hoped that Norway would align with EU rules "on a voluntary basis" to "secure the Norwegian power market against VAT fraud". It added that Norway's "tax authorities themselves" had confirmed to the media that Norway was, in effect, "keeping the doors open to fraud".
Epex conducted discussions with Norway's tax authorities late last year, which were characterised as "good", but the finance ministry appears to be unmoved on EU VAT harmonisation. This is the latest flashpoint in a lingering dispute within Norwegian politics over whether it is best to pull back or move closer to the EU power market.
Norway's coalition government fell apart earlier this year as the country's centre party left the ruling alliance over lead-partner Labour Party's willingness to align Norway more closely with the EU and adopt the bloc's fourth energy package. This leaves the Labour Party to govern as a minority government until parliamentary elections take place on 8 September.
