Norwegian Government Unexpectedly Disqualifies Miners From Tax Subsidies For Energy-Intensive Businesses
Bitcoin miners in Norway will have to shell out a lot more for power costs beginning January 1, 2019. The Norwegian government unexpectedly announced that Bitcoin and cryptocurrency miners will no longer qualify for the tax break provided to power-intensive businesses.
The tax break allows companies that consume more than 0.5 megawatts to pay a discounted rate of 0.48 Norwegian Krone (DKK), approximately $0.056, per kilowatt hour instead of 16.58 DKK ($1.93). This would represent an increase of 3,354% for the miners in electricity cost.
Energy-rich and efficient country
Cryptocurrency mining in Norway has been quite cheap, primarily because the country has enormous energy production capacity. The country is one of the biggest hydroelectric power producers in the world and scores big on its green energy initiatives.
However, as reported in a local news outlet, the Norwegian government, via its budget, has said that cryptocurrency miners will need to pay regular tax applicable to electricity consumers as from January next year.
According to Lars Haltbrekken, a parliamentary representative, the government’s decision to scrap the subsidies is the right move. As quoted in the Aftenposten newspaper, the vocal legislator said that:
“Norway cannot continue to provide huge tax incentives for the most dirty form of cryptographic output like bitcoin. It requires a lot of energy and generates large greenhouse gas emissions globally.”
Currently, companies that operate large cryptocurrency mining farms benefit from electricity tax discounts that are similar to those enjoyed in other industries that are power-intensive.
The current tax subsidy means that those firms whose capacity exceeds 0.5 megawatts only pay 0.48 DKK or $0.056 per kilowatt.
The subsidized rates are much lower when compared to the standard rates of 16.58 øre or $1.93 per kilowatt hour that mining firms will have to pay beginning January 1.
Bitcoin miners in the country currently pay a mere 2.8 percent in tax rates. However, when considered against the standard rate that they would pay without subsidies, scrapping the tax breaks automatically increases payable rates by more than 97 percent.
Miners are therefore set to feel the heat in the New Year as powering mining rigs becomes more expensive, even as profitability from BTC dwindles due to price declines.
Government’s action criticized
Some industry experts and analysts have expressed dismay at Norway’s decision, terming it unnecessary.
Gjermund Hagasæter, a spokesperson for one of the largest mining firms in Norway, said that this was a ‘disaster’ for the crypto industry in the country. He added that the action “gives a terrible signal to foreigners that are thinking of investing in Norway.”
ICT Norway, an interest group that supports the tech industry, also criticized the government’s action. Roger Schjerva, the chief economist at the firm, told Aftenposten:
“This is shocking. Budgets have changed framework conditions without discussion, consultation or dialogue with the industry.”
The proposal to have the subsidy removed came from the Norwegian Tax Administration, a government agency under Norway’s Ministry of Finance.
As it is, with the new tax measures taking effect in January, prospective cryptocurrency miners will most likely look to other countries like Sweden and Denmark as potential destinations.
Disclaimer: This is not investment advice. Cryptocurrencies are highly volatile assets and are very risky investments. Do your research and consult an investment professional before investing. Never invest more than you can afford to lose. Never borrow money to invest in cryptocurrencies.