The municipal elections are close. Our thoughts go back to the election campaign in the autumn of 2015, when property tax was the big topic. The red-green parties’ property tax model for Oslo was highly controversial, and the issue was widely debated. Raymond Johansen (Labour Party) put his head on the block, stating that he had full control:

“I am campaigning for this and will ask the inhabitants of Oslo on this issue. There are no problems involved in implementing this model. I have full control: The property tax will be introduced, it will only take some time getting it in place.”

Four years after, we have the answer. There were indeed problems with Oslo Municipality’s property tax. Big problems. Raymond Johansen did not have full control, on the contrary; the decision to levy property tax in 2016 was invalid and Oslo’s property tax model just within the limits of legality.

Although the city council was aware of the statutory time limit of 1 March, the city council chose to levy property tax four months too late. The Supreme Court emphasised that the municipality did not have a realistic plan for levying the property tax within the time limit. The plan was to levy the tax several months after the expiry of the time limit, which did not form any basis for extension of the time limit. The Supreme Court forthrightly dismissed the municipality’s protest against repayment.

“But here, the error is that the tax was levied too late, an error that cannot later be rectified. New decisions to levy property tax will therefore not be legal, which means that the only possibility is to repay the tax paid. The duty sets in automatically, without any further considerations or exercise of discretion on the part of the municipality.”

Raymond Johansen now invokes “good faith” and blames the Ministry of Finance.

“But we were in good faith, we sought advice from the Ministry of Finance and were told that the time limit for levying property tax had not expired. But they were wrong, and so were we, but we are now putting things straight.”

The fact that the breach of law is now being put straight is good and should go without saying in a state governed by the rule of law. The municipality must repay NOK 250 million of illegally collected property tax to 50 000 home owners. But it is not correct that the municipality was in good faith and sought advice from the Ministry. There is an unpublished statement which the municipality during the court hearing confirmed not being aware of. The municipality obtained advice from the City Advocate in Oslo, who was clear that there was a risk of legal action if the municipality was to levy property tax after the time limit of 1 March. The red-green coalition thus took a calculated risk when making the rush decision to introduce property tax in 2016. And they were boasting of their rush decision:

“No others have introduced property tax in such a short time as the Municipality of Oslo is now about to do. And we have a scope that is at least ten times that of most other municipalities. So the short time limit is the main risk and the reason for our tight progress plan, says Tanke.”

Oslo’s inhabitants had deserved better. The rush introduction is a stark contrast to other municipalities. Utsira, the least populated municipality in Norway with approximately 200 inhabitants, and Saltdal Municipality with its 4 700 inhabitants found that it was not possible to introduce property tax with such a short time limit and both postponed the introduction by one year.

In 2017, the municipality used a tax rate of three per thousand. The undersigned has submitted a request for reversal to the municipality and announced a new group action: As 2016 is invalid, the property tax rate in 2017 can be maximum two per thousand. Here, there is no room for doubt with regard to interpretation. One third of the property tax for 2017, approximately NOK 177 million, will have to be repaid.

Failure by the municipality to rectify this error would be contrary to the fundamental ideals of a state based on the rule of law. The authorities’ main duty is to comply with provisions that limit and frame what decisions they may adopt. The municipality may not profit from its own violations of the law. Levying a tax at a rate that is too high is an error that cannot later be rectified, with the consequence that repayment is the only possibility. Also here, the duty will set in automatically, without any further considerations or exercise of discretion by the municipality.

After the Supreme Court judgment, the municipality boastingly stated that the judgment showed that the municipality was “fully entitled” to adopt its basic allowance model. But was that what the Supreme Court actually wrote? If one takes the trouble to read the grounds of the judgment, one will see that the Supreme Court is referring to the fact that the law “sets a limit for the basic allowance the municipality may set”. The Supreme Court further states that it “will often be incompatible with the law” to exempt 80 percent of the residential units. It was nevertheless accepted in this specific case, because, due to the size of Oslo Municipality, approximately 50 000 residential units were still subject to property tax. But the Supreme Court emphasises that “the municipality is close to the limit set by the Property Tax Act”.

Chew a little on this sentence. It should give food for thought. Does the city council want to continue balancing on this limit? What will it mean for tax morals and taxpayers’ wish to attempt evasions if public authorities show them that it is ok to be operating on the fringes of the law?

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