QUALITY REPORT. Module on Net Social Protection Benefits (Restricted approach) REFERENCE YEAR: 2015 REPORT ISSUED:

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1 QUALITY REPORT Module on Net Social Protection Benefits (Restricted approach) (according to the draft regulation on the collection of ESSPROS net social protection benefits and the Gentleman s agreement for the transition period (Doc. SP/2010/11/EN)) MEMBER STATE: Norway REFERENCE YEAR: 2015 REPORT ISSUED:

2 Note - Referencing AITRs, AISCRs and residual fiscal benefits: When referring to tax/social contribution rates or residual fiscal benefits in the ESSPROS net social protection benefits (restricted approach) questionnaire a standard format should be applied. AITRs and AISCRs Each individual rate can be identified by the type of rate, the scheme and the benefit concerned. Based on this, the format used to identify rates should be the following: RATE_TYPE SCHEME_NUMBER BENEFIT_CODE RATE_TYPE refers to the type of levy (i.e. taxes or social contributions). For this variable the following codes may be used: T (taxes) SC (social contributions) TSC (both taxes and social contributions) SCHEME_NUMBER refers to the scheme. For this variable please specify scheme x where x is the number of the scheme. In cases where multiple schemes need to be referenced, x can be a comma separated list of scheme numbers (e.g. schemes 1, 4, 6 ). In cases where all schemes need to be referenced then SCHEME_NUMBER can be set to all schemes. BENEFIT_CODE refers to the ESSPROS benefit code. This may be a single code (e.g ) or a comma separated list (e.g , ). Aggregate level codes can be used to refer to all relevant subsidiary codes (e.g would be assumed to refer to all benefits for which taxes/social contributions are applicable in the old age function; would cover all non-means tested periodic sickness benefits, etc.). If all benefits within a scheme are affected then the value of this variable can be set to all benefits. Examples: -Referring to an AITR applied to non means-tested periodic disability pension for scheme 7: T scheme Referring to AITRs applied to all means-tested and non means-tested periodic cash benefits for old age pensions: T all schemes , Referring to AITRs applied to all means-tested and non means-tested periodic cash benefits for old age pensions for schemes 5 to 7: T schemes 5, 6, , Referring to AISCRs applied to all old age benefits for all schemes: SC all schemes Referring to AITRs and AISCRs applied to old age benefits for scheme 4: TSC scheme Referring to AITRs applied to all benefits within scheme 7 and 8: T schemes 7, 8 all benefits Residual fiscal benefits Each fiscal benefit should be referenced using the format FB BENEFIT_NUMBER where BENEFIT_NUMBER refers to the number element of the columns used to report data on fiscal benefits in the questionnaire ( Fiscal 1, Fiscal 2, Fiscal 3,. ). A comma separated list can be used to reference multiple fiscal benefits or all in case all residual fiscal benefits are affected. Examples: - Referring to fiscal benefit no.1: FB-2 - Referring to fiscal benefits 1 and 4: FB-1,4 - Referring to all fiscal benefits: FB-all Quality Report Module on Net Social Protection Benefits (Restricted approach) Page 2 of 13

3 1. Benefits liable to taxation and/or social contributions Please list all benefits reported in the ESSPROS Core system that are potentially liable to taxes and/or social contributions. Benefits subject to taxation (please specify the scheme number and codes of benefits reported to the ESSPROS Core system which are potentially liable to taxation in the format SCHEME_NUMBER BENEFIT_CODE) Benefits subject to social contributions (please specify the scheme number and codes of benefits reported to the ESSPROS Core system which are potentially liable to social contributions in the format SCHEME_NUMBER BENEFIT_CODE) Scheme 1, Schemes 1,3,4, Scheme Scheme Schemes 1,3,4, Schemes 3,4, Schemes 1, Schemes 1,3,4, Scheme Scheme Schemes 1, Scheme Scheme Scheme Quality Report Module on Net Social Protection Benefits (Restricted approach) Page 3 of 13

4 2. Accuracy and reliability 2.1 Data sources (part 1) Which sources of data have been used to produce the reported AITRs, AISCRs and any residual fiscal benefits. Please be exhaustive. Name of data source Type (1) Frequency of the data source in months (2) The Norwegian Labour and Welfare Service (NAV) Wage statistics. End of the Year Certificate Register is from 1 January 2015 replaced with the A-scheme. The A-scheme is common to the Norwegian Labor and Welfare Service NAV, the Tax Administration and Statistics Norway, and makes it easier for employers to report mandatory information to the authorities. The A-scheme has replaced five forms that employers are obliged to report: Among others, Salary and deductions that was part of the information in the End of the Year Certificate Register. The codes in the End of the Year Certificate Register was the link between the payment on personal level in NAV and the tax-return that is the base in the LOTTE-skatt model that simulate the AITR. These codes are now replaced by detailed texts, and we Time lag in AITRs/AISCRs/residual fiscal benefits covered (4) months (2)(3) (please list the AITRs/AISCR derived using each data source using the format: RATE_TYPE SCHEME_NUMBER BENEFIT_CODE and list fiscal benefits using the format: FB _ BENEFIT_NUMBER) Register based data months TSC , , , , , , ,, , , , TSC , , , TSC , , , , TSC , , Register based data 12 6 months TSC TSC , , , TSC , , , TSC New from 2015 TSC Quality Report Module on Net Social Protection Benefits (Restricted approach) Page 4 of 13

5 consider these to be more precise as input to calculate the AITRs LOTTE-skatt modell (LOTTE-tax calculating model) Micro-simulation model 12 2:Yearly 3:13 months All of above. 1. Please specify: "Administrative data", "Register based data", "Survey", "Micro-simulation model", "Other". For category "Other", please specify the type. 2. Please specify: "3 months", "6 months", or "12 months" or etc. In the case of micro-simulation models, please inform on both the frequency with which the model is updated to reflect changes in the fiscal system and the frequency with which any underlying sample data are updated. 3. The time lag is the period between the reference year and the moment in which data are available from the data source. 4. For further information on the format required for listing AITRs/AISCRs/fiscal benefits refer to the notes at the top of the questionnaire. 2.1 Data sources (part 2) please note that part 1 and part 2 are in fact one table and have only been separated to facilitate the completion of the table Name of data source (Please indicate the same data sources as in table 2.1 part 1) The Norwegian Labour and Welfare Service (NAV) Wage statistics. End of the Year Certificate Register is from 1 January 2015 replaced with the A-scheme. The A-scheme is common to the Norwegian Labor and Welfare Service NAV, the Tax Administration and Statistics Norway, and makes it easier for employers to report mandatory information to the authorities. The A-scheme has replaced five forms that employers are obliged to report: Among others, Salary and deductions that was Any additional information regarding this data source (i.e. report on problems that lead to estimation of data) (5) Scheme 4: The Municipal Pension Fund (KLP) and the rest of the institutional sector, S12 Financial corporations. Due to new legislation from 2008, new data became available. Scheme 4 is subsequently revised in the core system from 2008, and the scheme is now fully covered. Sample (i.e. which part of benefit recipients are covered by this data source) (6) Full coverage with one exception. In the case of TSC , the estimated tax rate is based on data for those persons who are sick beyond 16 days. We assume the data is also valid for those with sick leave benefits less than 16 days. Full coverage. Quality Report Module on Net Social Protection Benefits (Restricted approach) Page 5 of 13

6 part of the information in the End of the Year Certificate Register. The codes in the End of the Year Certificate Register was the link between the payment on personal level in NAV and the tax-return that is the base in the LOTTE-skatt model that simulate the AITR. These codes are now replaced by detailed texts, and we consider these to be more precise as input to calculate the AITRs LOTTE-skatt model Not applicable 5. Please fill in this column in cases of: delays, estimations, incomplete data, incomplete breakdowns of data or any other reasons that lead to estimations. In cases of data that do not provide adequate breakdowns for specific AITRs/AISCRs, please identify the rates affected using the format RATE TYPE SCHEME NUMBER BENEFIT CODE. 6. Please indicate "Full coverage" if the data source covers the whole population of benefit recipients. If the data source contains data for only some recipients, please specify the sample and identify any ways in which the sample characteristics may differ from that of the total population of benefit recipients. 2.2 Use of multiple data sources Where appropriate (i.e. if cross data-sources are used) please indicate the AITRs, AISCRs and residual fiscal benefits derived from multiple data sources. AITRs, AISCRs or residual fiscal benefits (please list the AITRs/AISCRs affected using the format: RATE_TYPE SCHEME_NUMBER BENEFIT_CODE and list fiscal benefits using the format: FB _ BENEFIT_NUMBER) Data sources (please specify at least two data sources from those listed in table 2.1 and explain how they are used together) 2.3 Comparability (completeness of coverage) Please indicate cases where: AITRs or AISCRs could not be provided for one or more benefits or groups of benefits liable to taxes or social contributions (i.e. AITR/AISCR reported as 0 when a positive and non-zero value is expected); Quality Report Module on Net Social Protection Benefits (Restricted approach) Page 6 of 13

7 AITRs or AISCRs do not cover all aspects of the fiscal system. For example, the tax/social contribution rates provided cover the main elements of the fiscal system but do not cover some particular aspects (i.e. positive and non-zero AITR/AISCR reported but the value does not reflect all aspects of the fiscal system). A fiscal benefit that gives relief to taxes/social contributions paid on social protection benefits is not taken into account in AITRs/AISCRs and has not been included as a residual fiscal benefit (i.e. positive and non-zero AITR/AISCR reported and reflects all aspects of the fiscal system except a particular relief for social protection purposes, the value of which has not been reported as a residual fiscal benefit). AITRs, AISCRs or residual fiscal benefits (please list the AITRs/AISCRs affected using the format: RATE_TYPE SCHEME_NUMBER BENEFIT_CODE and list fiscal benefits using the format: FB _ BENEFIT_NUMBER) Type of incomplete coverage (please give a brief explanation as to what is not covered and the reasons for this) 2.4 Comparability (coherence with the methodology) AITRs, AISCRs or residual fiscal benefits (please list the AITRs/AISCRs affected using the format: RATE_TYPE SCHEME_NUMBER BENEFIT_CODE and list fiscal benefits using the format: FB _ BENEFIT_NUMBER) Cases of non-application of the net social protection benefits (restricted approach) methodology (please provide a comprehensive list of any cases where the data reported may not fully comply with the methodology for net social protection benefits (restricted approach) for reasons other than incomplete coverage) 3. Methodologies and assumptions used to estimate AITRs, AISCRs and residual fiscal benefits Quality Report Module on Net Social Protection Benefits (Restricted approach) Page 7 of 13

8 AITRs/AISCRs and fiscal benefits covered (please list the AITRs/AISCRs affected using the format: RATE_TYPE SCHEME_NUMBER BENEFIT_CODE and list fiscal benefits using the format: FB _ BENEFIT_NUMBER) All AITR/AISCR Estimation method (7) (please explain methodologies used for all estimations) The tax return data for all residents of Norway are incorporated in the LOTTE model which is used to calculate the average itemised tax rates (AITR). Assumptions necessary to make these estimations (please explain any important assumptions made in developing the estimations) Coverage of the fiscal system concerned (8) Full coverage The Average Itemised Tax Rate (AITR) is the sum of the estimated tax paid by each individual on a given benefit divided by the sum of the actual benefit. The average Itemised Social Contribution Rate (AISCR) is the sum of contributions by each individual to social schemes from a given benefit divided by the sum of the actual benefit. It is not possible to define an AISCR for the receiver of social expenditures in the Norwegian benefit and taxation system therefore the AITRs includes social contributions. We use the data that is used as an input into the LOTTE model to split a person s income into four different types: employed labour income self-employed labour income transfers Quality Report Module on Net Social Protection Benefits (Restricted approach) Page 8 of 13

9 capital income These types of income are taxed differently in Norway. We split the personal tax burden to relate an amount of total personal tax to each type of income. A personal tax rate for each type of income is then created by dividing tax by income. A taxable benefit is classified as one of the above mentioned income categories. For each individual, the tax paid on a benefit is derived using the personal tax rate for the corresponding income category. AITR of 2015 Next, the taxes and the benefits are aggregated over all resident citizens. A general tax ratio can then be calculated by dividing aggregated tax by aggregated amount of the benefit. We use the AITR of 2014 as a substitute for the AITR of 2015, as the LOTTE model did not produce a reliable estimate for If micro-simulation models are used please identify them here and mention any important assumptions that are made in the third column. 8. Please identify any aspects of the fiscal system concerned which are not taken into account. This should include fiscal benefits, marginal tax rates, tax free allowances, coverage of the tax base in calculations of tax rates which will result in deviation from the true value of the AITR, AISCR or residual fiscal benefit. Quality Report Module on Net Social Protection Benefits (Restricted approach) Page 9 of 13

10 Changes in the data sources used (9) Changes in the methods used for estimating data (10) Revisions of data due to conceptual adjustments (11) Revisions of data due to availability of final statistics (12) Other revisions of data (e.g. due to quality review actions) 4. Revision of statistics In this section please provide the details of any revisions that have been made to data submitted previously. For each revision, use the first column to indicate the AITR, AISCR or fiscal benefit that has been revised, put an 'X' in the column that corresponds to the type of the revision and, finally in the last column, provide a brief description of the revision, specifying if it is extraordinary (very rare) or ordinary (it can happen regularly). AITRs/AISCRs/fiscal benefits covered (please list the AITRs/AISCRs affected using the format: RATE_TYPE SCHEME_NUMBER BENEFIT_CODE and list fiscal benefits using the format: FB _ BENEFIT_NUMBER) Type of revision Details of the revision (please provide a brief description) x 2013 and 2014 have been corrected due to errors detected in previous calculations. 9. E.g. new/updated data sources; additional information supplied by particular data sources; other changes in data sources. 10. E.g. changes in the methods used; revised methods to improve coherence with the ESSPROS net social protection benefits (restricted approach) methodology; other changes in methods. 11. E.g. changes in the ESSPROS net social protection benefits (restricted approach) methodology; in the social protection system; in classifications or definitions other than ESSPROS; etc. 12. E.g. final figures are provided by the data sources; or provisional estimations are replaced by information that was missing in the last data collection; etc. 4. Other information related to Quality 4.1 Quantitative data We consider the estimated tax rates to have a good reliability (unless otherwise remarked). This conclusion is based on the data quality and controls we perform to verify this. Control I: comparing data sources: benefit payments from NAV vs. taxation data on person level The input data on benefit payments from NAV (and other sources) have a high degree of match with the information from the tax return used in the LOTTE skatt-model.. Quality Report Module on Net Social Protection Benefits (Restricted approach) Page 10 of 13

11 Control II: comparing the accounts information (ESSPROS input data) with benefits data on personal level provided by NAV. The sum of the reported benefits paid is (manually) controlled against information on several accounts (state account, municipal account, ). In most cases these totals match to an acceptable degree, but we have two exceptions. 1) In some cases they differ, but does not represent a data problem. 2) In a few cases the differences may have an impact on the estimated values, but we have not been able to perform necessary control on micro level. Quality Report Module on Net Social Protection Benefits (Restricted approach) Page 11 of 13

12 4.2 Qualitative information* AITR : The increase in the AITR stems from a change regarding two benefits and the taxation of these. As of 1 January 2015 a new disability benefit was introduced as compensation for the disability pension. This benefit is designed to adapt the new pension reform from The following benefits ceased on that date (Jan. 1 st 2015): Supplementary pension, Special supplement and the Disability pension. A disability degree of 50% or more is required to obtain the disability benefit. Disability benefit is taxed as income (therefore a higher tax rate), and those entitled to the benefit is (within a certain level) given the opportunity to work beside - without altering the disability degree. AITR : Special supplements were means tested, but vanished in 2015 due to the change explained above, ESSPROS-item AITR : The tax rate increases significantly compared to previous years due to changes in the taxation on this benefit. As the new taxation applies only to new recipients, we expect a further increment the next years. AITR : There is a significant increment in the tax rate since From 2015, disability pension is taxed as income, and those entitled to the pension is given the opportunity to work beside, without altering the disability degree, but the pension will be deducted towards income. This pension can be granted even with a disability degree below 50%. If a disability degree 50% or above the pension will be coordinated with disability benefit in the NIS. AITR : There is a significant increment in the tax rate since From 2015, disability pension is taxed as income, and those entitled to the pension is given the opportunity to work beside,, without altering the disability degree, but the pension will be deducted towards income. This pension can be granted even with a disability degree below 50%. If a disability degree 50% or above the pension will be coordinated with disability benefit in the NIS. AITR : We do not know the reason for the change in this AITR. We do know that this AITR is based on data that have a weakness regarding our ability to identify the recipients. Benefits paid to children younger than 17 are added to the parent s income, and in the LOTTE tax calculating system are not able to identify the taxation of the recipient/parent. Subsequently - only children that are 17 years old, will be identifiable to our tax calculating system LOTTE. This weakness may cause fluctuations in the calculated tax rate. AITR : The tax rate on this ESSPROS item is influenced by the new pension regime in From Jan. 1 st 2011 the new anticipated pension in privat sector was schanged from an early pension from year to a life-long surcharge that comes as an addition to the pension from NIS. The new pension reform gives everybody with 40 years of earnings posibility to draw partial or full pension in NIS from 62 years. New Quality Report Module on Net Social Protection Benefits (Restricted approach) Page 12 of 13

13 pensioneers are allowed to work beside receiving this benefit, and generally new recipients (from 2011 on) therefore have higher income than recipents who get the benefit based on the legislation from 2010 and prior. The number of recipients in the latter group declines as they become ordinary pensioneers (67). The first group of recipents those with a high tax rate therefore weights increasingly more each year, and the reported AITR have therefore increased year by year since AITR : The 2015 data did not produce a reliable AITR, and we have substituted the model result with an estimate: we use AITR of As we have no possibility to get a new revised estimate in time to this reporting this year, we will follow this issue up when we are working on the AITRs next year. AITR : We have a breach in the AITR time series in The break is due to the new data collection system, A-scheme, which was introduced in This improves the basis for calculating the taxes, and the AITR reported for 2015 is more precise than previous. AITR : This is a NEW AITR. We now have been able to collect the relevant data to calculate a tax rate on this ESSPROS item. AITR : We do not know about any specific reasons for the increase in the AITR on this ESSPROS item. *E.g. If there are some items not covered by QI, please specify the reason and, if it is possible, their relative importance in respect to the total expenditure, etc. 4.3 Dissemination policy in the country* Are these data published in your country? (13) NO At what timeliness? (in months) (14) State any specific publication (and eventually the link) Are they part of regular publications? (yes or not) *Optional 13. Please specify "yes everything", "yes, only the following part ", "yes, but not in the ESSPROS format" or no". In case of "yes, but not in the ESSPROS format", please explain. 14. Please specify how many months after the period of reference the data are published (period of reference = 31 st December of the reference year). Quality Report Module on Net Social Protection Benefits (Restricted approach) Page 13 of 13