Despite achieving record first-quarter profit and revenue, salmon farming giant Mowi has warned of the potential long-term consequences that would likely follow the introduction of Norway’s proposed new aquaculture resource tax in its current form.
The Norwegian government presented a revised resource rent tax proposal to parliament on 28 March, 2023, with a few changes made from its initial proposal, which was announced in September 2022. These included a reduction in the tax rate from 40 percent to 35 percent. As such, the proposed total tax rate is now 57 percent, including corporate tax, compared to 62 percent previously, rising to about 75 percent when including Norwegian wealth tax.
Mowi CEO Ivan Vindheim insisted that, even with the revision, it remains “totally out of proportion and unsustainable.”
Delivering Bergen, Norway-headquartered Mowi’s Q1 2023 results in Oslo, Norway, on 10 May, Vindheim said there were “disappointingly few changes” in the revision, with it being “almost devoid of almost any concessions” to the industry. But he said he remains hopeful the needle will move now that political negotiations are underway, with a final vote expected before the summer.
As documented by several parties in the consultation process, including Mowi, the tax model is not fit for effective business, he said.
“As it stands today, the proposal will be hugely detrimental to the Norwegian salmon industry and puts major limitations on future growth and development if it’s enacted, because there’s no such thing as a free lunch. The additional millions of Norwegian kroner going to resource rent tax payments going forward will not be replaced by external capital infusions and, therefore, will deteriorate the investment capacity of the industry,” Vindheim said. “Ultimately, it will lead to the demise of [Norwegian salmon farming] … our Silicon Valley — the family silver.”
With huge global demand for salmon, the likelihood is that the industry will relocate to other countries and its technological shift will accelerate at the expense of Norway, Vindheim said.
“We cannot let this happen. It’s too important for that,” he said. “The bill is still to be voted on before the summer, and no matter what, we won’t give up until we have secured a Norwegian salmon industry with reasonable framework conditions going forward. So, if anything, this is just the first round — we will fight until cramps get us, and then we will fight a little more.”
Mowi CFO Kristian Ellingsen advised that 80 percent of Mowi’s earnings in Norway are related to the seawater grow-out phase, which is the only stage to which the proposed additional 35 percent resource rental tax applies. As such, work is now underway to establish a pricing methodology that measures the seawater phase with the rest of the value chain.
“Until now, this has not been relevant because everything has been part of the same tax machine, but now it becomes important,” Ellingsen said, adding that with a wide range of transactions involved, Mowi’s work to establish the correct principles and prepare robust documentation will take time to conclude.
With the government yet to finalize a formal agreement, the IFRS has not officially enacted the tax change, so the tax estimate did not impact Mowi’s profit and loss statement and its balance sheet in Q1 2023...
Photo courtesy of Ivan Vindheim/LinkedIn
