The renewal of the Norwegian system of regionally differentiated social security contributions

On 18 June 2014, in Decision No 225/14/COL, the EFTA Surveillance Authority (ESA) approved the prolongation of the scheme for another 7 years.

The system of regionally differentiated social security contributions is the most extensive aid scheme in Norway. The total annual reduction in social security contributions for undertakings affected by the State aid rules is estimated to be more than 900 million euros.

All employers in Norway are subject to compulsory contributions to the national social security scheme, calculated on the basis of the gross salary paid to the employees. The general tax rate is 14.1%. This tax rate is reduced in the five geographical zones covered by the scheme, from 10.6% in the southernmost zone down to 0% for the northernmost zone covering Finnmark county and certain municipalities in Troms county.

The tax reductions at issue represent operating aid within the meaning of Article 61(1) EEA to the beneficiaries as it reduces their current expenditure. As ESA observed, the said reductions amount to a consumption of state resources by way of income foregone by the State with the application of reduced rates of social security contributions and confer an economic advantage on the eligible undertakings compared to ineligible undertakings. The scheme covers both the public and private sectors within the designated area. When the eligible undertakings provide goods or services in competition with undertakings falling outside the scope of the scheme, the latter will benefit from an advantage compared to the former. Thus, competition between undertakings will be distorted. As the scheme covers a multitude of sectors in the designated area, such as mining and manufacturing, construction, wholesale and retail trade and telecommunications, it also affects trade between the Contracting Parties to the EEA Agreement.

Social security contributions have been regionally differentiated in Norway since 1975. ESA last made a full assessment of the system of regionally differentiated social security contributions in 2006. At this point in time, ESA raised no objections to the system, which was approved until 31 December 2013. This was later extended until 30 June 2014, when the new Guidelines on Regional State Aid for 2014-2020 (the RAG) were adopted. They will enter into force on 1 July 2014.

Following pre-notification discussions, the Norwegian authorities notified the regionally differentiated social security contributions 2014-2020, pursuant to Article 1(3) of Part I of Protocol 3 by letter of 13 March 2014. The new scheme was assessed under the new RAG.

The Norwegian authorities have expanded the scheme geographically to include 31 new municipalities. At the same time, the sectoral scope of the new rules is tighter than before, meaning that some sectors will no longer receive aid by means of a reduced social security contribution.

On 18 June, in Decision No 225/14/COL, ESA approved the renewal of the notified aid scheme for another 7 years. Under the compatibility assessment, it concluded that by alleviating the cost of employment in disadvantaged areas, the scheme aims at a regional policy objective of common European interest and is an appropriate policy instrument in this respect. Moreover, it has an incentive effect and will not affect competition or trade to an extent contrary to the interest of the Contracting Parties to the EEA Agreement. It also meets the transparency requirements of the RAG.