Tax breaks and higher child allowance

Next year’s state budget surplus will be lower than this year’s and much lower than in 2021.

This year’s surplus is estimated at DKK 37 million, and next year’s surplus is forecast at DKK 12.4 million. Last year saw a surplus of DKK 138 million.

In other words, the state budget has been in surplus ever since the Covid-19 pandemic began in March 2020.

These were some of the introductory remarks by finance minister Uni Rasmussen as he presented the 2023 budget proposal this morning.

Tax breaks

The proposal includes higher child allowances and adjusted tax bands.

Child allowances are set to increase by DKK 1,500 for children aged 7-17 and by DKK 2,000 for children below school age.

With the higher child allowances and the adjusted tax bands, the disposable annual income of a family with two young children where each parent earns DKK 30,000 per month will increase by about DKK 10,000.

The tax breaks, expected to cost the state DKK 70 million, will be financed by adjusting the water access fees paid by aquaculture operators.

More pedagogue students

For 2023, the government prioritises future growth and expansion of the Faroese society.

This will include the launch of a dedicated export council, Export Faroe Islands, plus continued development of the Talgildu Føroyar national digitalisation programme.

Funding has also been earmarked for further development of the tourism industry.

An additional class of pedagogue students will be added at the University of the Faroe Islands, and work to build a university campus will be expedited.

Medical and psychological services

Health services feature prominently in the budget proposal, with funding set aside for increasing the number of doctors, improving cancer treatment and establishing emergency psychological aid services.

Money has also been assigned for an institution in Suðuroy for Alzheimer’s patients and for leisure activities for children with autism.

On the sustainable energy front, subsidies will be given to households that replace old oil-fired boilers with greener options, and VAT exemptions for electric cars will continue for another two years.

Prepared for slower economic growth

Russia’s war against Ukraine, rising living costs and interest rate hikes have affected the outlook on economic growth for the next 1-2 years.

“With this budget proposal, the government is committed to a responsible fiscal policy, taking the necessary precautions for the challenges ahead,” said the finance minister.

“The Ministry of Finance believes that the Faroese economy is strong enough to withstand a period with lower economic growth.”

Read the Faroese version of this article here.

More Faroese News in English.