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Why it’s all relative...

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By Gordon Boyle


With VAT part of life in Bahrain I thought it worth sharing how taxation works for another country I’ve got to know quite well.

Recently I’ve been involved with a Norwegian fish farming company and as a result I’ve made several visits to Norway. I’ve had the pleasure of visiting Oslo, Kristiansand, Ålesund and more recently Tromso in the Arctic Circle up in the far north of the country.

Norway is anything but cheap and Oslo is ranked as the 59th most expensive city in the world. The high cost of living is a result of its egalitarian social system. This relies on VAT and minimal variations between incomes among its citizens to sustain its unique economy and socio-economic structure.

Here are some differences to help you understand better. A Big Mac is 106 per cent higher than Bahrain and the fourth most expensive in the world, a Pepsi is 379pc more expensive, eggs cost 85pc more, chicken prices are 115pc higher but average salaries are 125pc more. Petrol is expensive, too. Norway is the only oil-producing country with high petrol prices. In fact, Norway has the one of the highest petrol prices in the world.

A key feature that defines the high cost of living in Norway is the increased tax rate. From income tax currently averaging 42pc to value-added tax at 25pc (except food at 15pc), Norway’s tax structure strengthens its egalitarian social system. One of the benefits of using this type of social system is that there is a very minimal differentiation between incomes in Norway and one of the lowest unemployment rates in the world.

While inadequate pay for minimum wage is a problem among many developed countries, Norway has abandoned this concept all together. Most citizens in different employment sectors, from education to food service, earn a living wage. This prevents wage-gaps and renders social classes in Norway to practically nonexistent but high wages make the service industry expensive. Although this boosts the price of common goods significantly, it also ensures that Norway’s working class does not become impoverished.

Education, health care and transportation in Norway are all subsidised by the government. High taxes provide for quality public services. This is especially evident in health care for Norwegian families; cash-for-care benefits, as well as free prenatal visits, including maternal and paternal leave, are all covered by the Norwegian government.

Mutual functionalism between Norway’s citizens and government not only allows its economy to thrive but its democratic process as well. By rewarding workforce participation with quality social welfare, the Nordic model is an economic solution to ensure societal development. Although the cost of living in Norway may seem inappropriate at first glance, there is no doubt that the Norwegian social system provides exceptional benefits for all citizens.

Finally, in the recently published Happiness Index Norway was placed at number two. In fact, the top four countries are all Scandinavian with similar taxation and pay models to Norway. In the GCC the UAE comes in at number 20 and the remainder of the GCC are in the mid-30s and 40s with Bahrain at number 43.

Maybe higher taxes, more pay equality, high-quality education and medical care are good for us all.

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