Nearly 80% of total car sales in Norway in September 2021 were electric vehicles. The surge is driven, in part, by a VAT exemption on electric cars. The Norwegian Road Federation says that 77.5% of new cars sold in the month of September were battery electric vehicles. The figure represents a steady upward trend. Electric vehicles comprised 61.5% of sales in September 2020.
The Tesla Model Y was the best selling car in Norway, accounting for 19.8% of cars sold. Another Tesla model – the Model 3 – took second spot.
Moreover, Norway’s stated goal is that all cars sold by 2025 should be zero emissions vehicles.
Will there be a luxury electric vehicle VAT?
Norwegian motorists are strongly incentivised to go electric. There is a 25% VAT rate on internal combustion vehicles, from which electric cars are exempt. In addition, non-electric vehicles are also subject to emissions taxes.
However, reports suggest that Norway’s new government could implement VAT on electric vehicles worth more than 600 000 kroner.
Who benefits from VAT exemptions?
An IMF working paper concluded that VAT exemptions on electric vehicles in Norway disproportionately benefit more affluent households. While potentially efficient in that richer households account for more emissions, the regressive nature of VAT raises questions about distributive consequences.
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