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Norway: VAT on Electric Car Leasing to Be Eliminated

(Nov. 29, 2013) It was reported on November 18, 2013, that members of the collaborating majority of parties in Norway’s Parliament agreed to eliminate the value-added tax on the leasing of electric cars and their batteries; a VAT of 25% is applied at present. (Eivind Bryne, Norway: Leasing of Electric Cars Zero Rated from 2014 (Nov. 18, 2013), TAX NEWS SERVICE.)

Electric car owners in Norway already enjoy a number of government incentives. No VAT or other taxes, public parking fees, or urban tolls are imposed on the cars, and they are given access to bus lanes, reducing the owner’s commuting time in rush-hour traffic. (Pierre-Henry Deshayes, Norway Warms to Electric Cars, AFP (Nov. 17, 2013); Jon LeSage, Strong Incentives Help Norway Love Electric Vehicles After All These Years,GREEN CAR NEWS (Jan. 7, 2013, 8:04 a.m.).) The incentives have been guaranteed by the Parliament to last until 2017, but they might have to be reconsidered if the current growth in sales of the electric cars continues (Lars Bevanger, Norway’s Electric Car Market Speeds Ahead, DW (Nov. 18, 2013).)

Some news reports refer to “Norway’s electric car revolution” because of the rapid growth in electric car purchases in the last three years. (Id.) However, according to Snorre Sletvold, head of the country’s Electric Vehicle Association, “[I]t took a long time to get the benefits,” which started with no import tax and no first-time registration tax before progressing over the years to include the other incentives. (Id.) The increased electric car sales have reportedly had a noticeable impact on the environment, with the average carbon dioxide emission from all cars in Norway now 118 grams per kilometer, versus 125 grams per kilometer in 2012. (Id.) In the United States, electric vehicles and plug-in hybrids are estimated to constitute about 0.6% of new vehicle sales; in Norway, they are nearly 5.2%. (LeSage, supra.)

On the other hand, skeptics question whether the success of Norway’s electric car market can be repeated in the markets for such cars in other countries, noting “the severe drawbacks to a model that relies on public subsidies worth as much as $8,200 per car, every year.” (Alister Doyle& Nerijus Adomaitis, Norway Shows the Way with Electric Cars, but at What Cost?, REUTERS (Mar. 13, 2013).) Factors that do not hinder sales in Norway, such as the inability of the cars to travel long distances and the need for major incentives to make the car purchase economical, might be obstacles in other countries’ electric car markets, the critics suggest. Moreover, in the opinion of Peter Schmidt, editor of England’s Automotive Industry Data Ltd., “Norway’s an oasis in a huge desert,” in terms of helping the environment, “[b]ut it’s an example [that] can’t be followed – it only works because Norway has a ‘supertax’ on normal cars.” (Id.)