Norway implemented a 22% rate for Airbnb apartments years ago. It has only served to raise more

Neither less offer nor less competitiveness. The “Airbnb rate” approved years ago by the Government of Norway in the face of the growing weight of the platform in the country seems to be innocuous. It has not served to encourage landlords to transfer their homes to the residential rental market, thus making them cheaper. Nor has it been noticed in the rates announced on the American website.

That at least is what slides a recent study on the subject published in Economics Letters. The report is from 2023, but it has gained special interest for Spain, where PSOE and Sumar have opened the debate on the application of a VAT of 21% to tourist rentals.

Spain is not the only country that has seen Airbnb expand its accommodation offering to a dizzying pace. It has happened in many other countries, including France, Italy or the US, which has already led some administrations to move tab to limit its influence on the market, if not directly expel him.

The Norwegian experience

Another good example is Norway, where years ago it also jumped a controversy due to the Airbnb boom: the tax exemption which short-term rentals enjoyed. The income generated with these short rentals, lasting less than 30 days and designed for tourists, was not subject to taxes.

And that, as the platform gained weight in the country, generated discomfort among both the hotels and part of the population. The first ones found themselves with new competition. The latter saw their options for finding affordable housing become more complicated.

Nothing that Spain has not experienced in its flesh.

With this backdrop, the Norwegian Government decided to make a move and years ago introduced a new tax aimed at short-term rentals. His nickname: “Airbnb tax”. Basically, starting in 2018, Norwegian landlords found that the money they earned through these types of rentals, designed for tourists, had to be taxed a rate of 22%.

That’s the summary, of course. The small print is somewhat more complex.

The Government decided to apply the tax only to those owners who exceeded an annual income threshold, 10,000 crowns, about 860 euros, and the rate was not extended to 100% of their turnover. It is calculated on 85% of that total value. On its website, Skatteetaten, the Norwegian Tax Administration, details exactly how and when The new tax is charged, including examples with apartments rented through Airbnb.

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What was Norway looking for with that measure? Marcel Garz and Andrea Schneider explain it in an article published in Economic Letters in which they analyze it in detail. Basically, returning housing to the residential rental market with more affordable prices. All while the public coffers received the new tax.

“In theory, the rate should cause the departure of the hosts for whom the tax burden would make renting unprofitable. Or it would induce price increases, since the hosts share part of the tax burden with the client. Or both. At least if the hosts comply with the tax,” they comment.

That was the theory. The reality turned out to be somewhat different.

After analyzing in detail the market response and comparing it with Sweden, a country with which Norway shares similarities in the social, tourism and real estate fields, Garz and Schneider came to a conclusion resoundingly: “Using individual-level population data between 2015 and 2019, we found no evidence that hosts in Norway abandoned Airbnb or increased their prices.”

In summary, in their report both researchers rule out that the tax has had relevant “economic effects.”

“We did not find a significant effect of the tax on hosts’ propensity to list properties on Airbnb, with point estimates close to zero. They also did not significantly change their number of properties listed,” abound. And regarding rates, they insist: “Any potential price increase was small at best compared with the rate of 22%“.

Their calculations show that landlords earned on average around $5,131 per year during the 208/2018 period, which would translate into paying hundreds of dollars per year in taxes. The sum is “high enough” —experts value— enough for a portion of those hosts to come to the conclusion that listing their homes on Airbnb was no longer profitable for them. Or at least that this cost was transferred to the final prices and had an impact on the customers’ pockets.

Neither of those things happened. And Garz and Schneider they point to a key factor that helps explain this apparent lack of results: how the measure was applied. In your article They speak of “poor application of taxes” and insist on the need to deploy “effective tax designs”.

“These results support the conjecture that the tax was not sufficiently enforced, as it depended on taxpayers to self-report their rental income,” they finish. In fact, Norway is already exploring other avenues also aimed at the sector, such as create a tourist tax.

Norway is not the only country that has moved in an attempt to alleviate the effects of Airbnb’s expansion. ago a decade Amsterdam agreed with the platform that it would be responsible for collecting the tourist tax from its clients, New York has imposed strict limits, which leaves another example of a frustrated control measure – the offer was moved to New Jersey; Barcelona directly wants to say goodbye to temporary rentals and in France they have started to update its regulations to reinforce the regulation of vacation rentals.

The Scandinavian case is, however, especially interesting in Spain, where the debate has been opened on the application of a 21% VAT to tourist apartments, a measure agreed upon by PSOE and Sumar during their negotiation of the tax package of next year.

From the sector they have already showed their concern by the measure, but if the example of Norway demonstrates anything, it is that the effects of the rate may not be as expected. Not at least, like Garz and Schneider slideif they are not accompanied by a good strategy.

Images | Darya Tryfanava (Unsplash) and Samuel Han (Unsplash)

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