Taxation on tip money got clubbed through. It’s done. One of the few gray areas of the economy got put into a coffin by the Norwegian parliament and will go in effect in 2019. Going from keeping 100% of the tip money, down to around 50% will be a hard blow for the ones working in the service industry on an intimate level – But the effect it will have is much, much deeper.
And so the day is here when the powers that be decided to pinch the workers for some extra tax-kroner: It started out as a bill from the Norwegian tax revenue administration and less than a year later, taxation on tip money will be mandatory as we turn the almanac over to the 2019 page.
Even though both politicians and union representatives have tripped over their own feet trying to present this as a positive thing, the reality is it isn’t – It will be a net loss that goes into the big, black hole of public spending. There are one or two positives, sure, but they are overshadowed by the negatives by a large margin.
Without going too deep in the weeds, this is what’s going to happen: The employer has to set up a system so that the tip money gets registered and reported. Out of that sum, around 14% gets stolen as payroll tax, 12% gets transported to the vacation money account of the employee and 3% gets inserted to the pension saving account. The last two will have the 14% payroll tax deducted off them as well, separately.
But wait, we are not done yet! There will be a 5% administrative fee and around 20% preliminary tax (the size depends on your total salary).
Phew, that’s a lot of percentages. The payroll tax is paid by the employer, so some employers are going to have a situation where their employees are so good (get a lot of tip from guests) that they’ll go bankrupt paying the state extra fees. In a business with already thin margins, many owners will have to pick one of four really bad options: They will have to either shut down, cheat on the payroll tax, raise prices or fire the good employees and replace them with worse. None of these are particularly attractive picks.
In the end, we will see a mix of all four happening in the span of next year. Prices on a good cocktail or burger will go up, the level of service will go down. Some businesses will hang a locker on the door because they aren’t profitable or from getting caught by the taxman.
The Norwegian Facebook group “Say no to the New Taxation of tips” has been the most vocal and active online opponent of the newly implemented tax and it started out when it was a mere suggestion from the parliament. With a size of about 10% of the nations restaurant/bar/café workers, it’s a very active community – a place for us in the service business to gather in and share our thoughts. The group also had an open door for anyone disagreeing with us and we give them a platform to chip in their 2 cents on the matter.
For me personally, the group was not a means to stop the taxation – That was going to go through no matter what, realistically – but to take a reading on the room temperature, get a feel for how people viewed this specific tax. I believe we are at the boiling point for how much BS people are ready to take, at least according to my layman readings. I hope I am right.
Earlier this year this year I lost my workplace due to inter-city politics. Oslo, where I work and live, is split up in different alcohol serving zones deciding businesses opening hours. The pub I was working at had the misfortune to be placed about a stone throw away from the newly drawn up borders and got its serving hours bumped down a good 4 hours. This, in turn, made it economically unviable to run a serving business out of that spot.
I might have lost my job and workplace, but more importantly: Oslo lost a cultural institution. Underwater Pub had a run spanning 25 years, with live Opera every Tuesday and Thursdays, open to the public and without a cover charge. Superstars in the Opera world have visited the small place just outside centrum – Nobel Price-level entertainers singing for 100s of millions of tv and streaming audiences was performing at the creaky staircases, for the modest pub’s beer-thirsty patrons. Lonely Planet, New York Times, and others from international media had visited the curious pub to get a piece of the unique atmosphere.
But now? Permanently closed not out of a public will (if the neighbors would get tired of having the place closed that would be more understandable) but through political administration. While Underwater closes, the Oslo Opera house hands out free tickets to the elite – Paid for by the commoners through taxes. That is pure corruption.
In my ideal world, it’s not only the crooks that can afford cocktails. Or Opera.