Norway Proposes NOK 608.4 Billion in Wealth-Fund Spending and NOK 6.4 Billion Income-Tax Cut in 2027 Budget

Norway’s government proposed a 2027 budget on Wednesday that would use NOK 608.4 billion of oil-fund resources on a structural basis while cutting personal income tax by about NOK 6.4 billion. The plan pairs broad tax relief on work with higher revenue from other parts of the tax system and is designed to leave the overall fiscal stance roughly neutral next year.

The NOK 608.4 billion figure is the structural non-oil fiscal deficit, Norway’s standard measure of underlying petroleum-revenue spending under its fiscal framework. It is not the same as the cash transfer from the Government Pension Fund Global, or GPFG, needed to balance the budget. The ordinary oil-adjusted deficit is estimated at NOK 561.7 billion, and that amount would be transferred from the fund to the central government budget.

In the government’s 2027 National Budget proposal, the Ministry of Finance said structural fund spending would equal 2.7% of the GPFG’s estimated value at the start of 2027. The ministry described the budget as consistent with Norway’s fiscal rule and below the fund’s expected long-term real return of 3%.

NOK 608.4 billion is the structural fund-spending measure

Norway’s fiscal rule is built around the structural non-oil deficit because the government wants its annual budget decisions to be judged after adjusting for temporary swings in tax receipts, unemployment-related spending, interest income and certain accounting effects. For 2027, the unadjusted oil-corrected deficit is NOK 561.7 billion. Adjustments for departures from trend and special accounting items raise the structural measure to NOK 608.4 billion.

The structural figure is expected to amount to 12.6% of trend gross domestic product for mainland Norway, compared with 12.7% estimated for 2026. Measured in constant 2027 kroner, the government says fund spending rises by NOK 4.9 billion from 2026. The budget indicator is effectively flat, with the ministry reporting a change of about minus 0.04 percentage point of trend mainland GDP, rounded to 0.0 in its headline tables.

The GPFG is computationally estimated at NOK 22.4 trillion at the beginning of 2027, about NOK 1.1 trillion higher than at the beginning of 2026. That larger base helps explain how the government can propose NOK 608.4 billion of structural fund use while keeping the fund-spending ratio at 2.7%. The ministry also notes that more than a quarter of the state budget is now financed through fund spending, making the public finances increasingly sensitive to large changes in the fund’s market value.

The 2027 plan includes NOK 85 billion in support for Ukraine. Separately, the state expects net cash flow from petroleum activities of NOK 568.4 billion. Because that petroleum cash flow is slightly larger than the NOK 561.7 billion cash transfer needed to cover the oil-adjusted deficit, the budget tables show a net NOK 6.7 billion allocation to the GPFG before the fund’s own interest and dividend income and market-value movements are taken into account.

Income-tax relief is paired with higher consumption and climate taxes

The government’s NOK 6.4 billion income-tax cut is centered on lower National Insurance contributions and a larger personal allowance. The contribution rate on wage income would fall from 7.6% to 7.4%, while the rate on other self-employment income would decline from 10.8% to 10.6%. The personal allowance would rise from NOK 114,540 to NOK 120,180, which the Finance Ministry says is about NOK 1,200 more than ordinary indexation would have produced.

The main rates of tax on ordinary income and the five bracket-tax rates would remain unchanged, although the bracket thresholds are adjusted. The government is also proposing a higher pension tax credit for low- and middle-income pensioners. According to ministry estimates, 98% of taxpayers would see their income tax fall or remain unchanged under the proposed changes. As an illustration, the ministry says a worker earning NOK 750,000 with standard deductions would pay about NOK 1,800 less tax in 2027.

The headline income-tax reduction does not mean the full tax-and-fee package cuts government revenue by NOK 6.4 billion. The government says the net effect of its 2027 tax and fee proposals is approximately zero when the package is assessed against its reference system and earlier measures that take effect in 2027 are included. The policy is explicitly framed as a shift away from taxing work and toward other tax bases.

One major offset is electric-vehicle value-added tax. The government proposes lowering the VAT exemption threshold for electric cars from NOK 300,000 to NOK 150,000, a change expected to raise about NOK 3.8 billion in 2027. It also proposes raising the general level of climate-related taxes to NOK 1,900 per tonne of carbon dioxide, which the ministry estimates would bring in an additional NOK 2.6 billion. At the same time, road-use taxes on mineral oil, biodiesel and petrol would be reduced by NOK 1.2 billion so that the overall tax burden on petrol and diesel used in road traffic remains broadly unchanged in real terms.

Finance Minister Jens Stoltenberg has described the income-tax package as the largest such reduction in a single Norwegian budget in more than 20 years. The comparison is based on the ministry’s assessment that a government has not proposed income-tax relief of this size in one budget since 2005. The broader tax package remains subject to parliamentary approval.

Budget is designed to be roughly neutral as inflation eases

The fiscal settings are being proposed against a forecast of firmer mainland growth and easing inflation. The Finance Ministry expects mainland Norway’s GDP to increase 1.7% in 2027 after projected growth of 1.1% in 2026. Consumer-price inflation is forecast to slow to 2.7% from 3.3%, while annual wage growth is expected to cool to 4.0% from 4.6%.

Those forecasts imply continued real wage growth if they materialize. Registered unemployment is projected to remain at 2.1%, while employment growth is expected to slow to 0.4%. The government says the improvement in household purchasing power should support private consumption, which the National Budget projects will rise 1.8% in 2027.

The Finance Ministry estimates real underlying government expenditure growth at just 0.2% from 2026 to 2027. Its conventional budget indicator is essentially neutral, while macroeconomic models that account for different effects from individual revenue and spending measures put the contribution to mainland GDP growth at about 0.1 to 0.2 percentage point. The ministry therefore characterizes the overall 2027 fiscal plan as having an approximately neutral effect on economic activity.

The proposal now goes to the Storting for consideration. Parliament’s decisions will determine the final 2027 tax rates, spending allocations and fund transfer, while the government is also preparing a broader tax-reform white paper for 2027.