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PR(04)34: EFTA Surveillance Authority opens formal investigation of a Norwegian proposal for regionally differentiated rates of social security contributions

7.10.2004

The EFTA Surveillance Authority decided yesterday to open a formal investigation procedure with regard to a notified scheme of regionally differentiated rates of social security contributions. The Norwegian authorities have notified their intention to apply from January 2005 onwards regionally differentiated rates of social security contributions to certain economic sectors in the Tax Zones 2, 3 and 4 of Norway. The reduced rates proposed by Norway correspond to the ones applicable until the end of 2003. These rates were considered incompatible aid by the Authority. However, a gradual phasing out of the differentiated tax rates in the course of a three year period was approved in November 2003[1].

One of the criteria foreseen under Article 61(1) of the EEA Agreement for a measure to constitute state aid is that it affects trade between the Contracting Parties to the EEA Agreement. In the opinion of the Norwegian authorities, the notified scheme has to be considered a non-aid measure since it only benefits undertakings which are not exposed to intra-EEA trade, and, therefore, the effect on trade criterion is not fulfilled.

The notification submitted by Norway covers more than 200 specified economic sectors, according to the standard industrial classification (NACE). The method used to identify sectors where a reduced social security contribution would not have any effect on trade between EEA States does not seem to ensure compliance with the jurisprudence on Article 61(1) of the EEA Agreement. Therefore, the Authority has serious doubts whether the notified scheme qualifies as non-aid within the meaning of Article 61(1) of the EEA Agreement. It is thus obliged to open the formal investigation procedure.

Should the measure constitute state aid, any aid granted in the form of reduced social security charges constitutes in principle operating aid. Under the EEA Agreement the possibilities to grant operating aid are limited. For that reason, the Authority also has serious doubts about the compatibility of the proposed scheme with the rules of the Agreement. This view corresponds to the Authority’s decision of November last year.

In this context, the Authority points out that the decision to open the procedure does not prejudge the final outcome of the investigation. Moreover, it has no effect on the decision of November last year to grant a three year transition period for tax rates in Zones 3 and 4.

For further information, please contact Mr. Amund Utne, Director Competition and State Aid, on tel. (+32)(0)2 286 18 50 or Ms. Maria J. Segura Catalán, Officer Competition and State Aid, on tel. (+32)(0) 2 286 18 53.

7 October 2004

[1]Decision 218/03/COL. See press release PR(03)32.

 




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