The Nordics replace licence fee with public service tax

News

| 18 September 2019

In June, the Storting (Norway’s parliament) voted for replacing the country’s radio and TV licence fee with a public service tax. This means that all the Nordic countries now have – or are on their way to having – shifted to tax-based funding of public service media. Still, the models chosen are not totally alike.

This is an updated version of an article published 13 May 2019.

Over the course of just a decade, all Nordic countries have chosen to replace the licence fee with a tax model. The aim has been formulated as that of creating a long-term and technology-neutral financing for public service media.

The first country to shift was Iceland, introducing a public service tax in 2009, followed by Finland in 2013. And now, the other countries are following suit: Sweden switched to tax financing at the beginning of this year; while Denmark will gradually shift from licence fees to tax funding during the period 2019-2021, ending with full tax funding from 2022 forward. The Norwegian proposal entails tax funding from 2020.

Throughout all the countries, the public service tax is platform-neutral. There is also an age limit: in Iceland, the tax is paid by people aged 16-70 years and in Denmark, Finland and Sweden, by people aged 18+; while in Norway, the limit will be 17 years. The tax replaces the previous household licence fee, linked to the possession of a TV set (in Denmark, the media licence also includes computers, smartphones and tablets with internet access).

Despite the similarities, there are differences between the models. The tax can be designed as a special public service tax, as a regular tax or as a reduction of the basic deduction. As for the tax level, Iceland and Denmark have a model which is independent of income, while the other countries have chosen an income-related tax. Another difference is whether the fee is included or kept outside the annual state budget negotiations.

More about the models in the different countries:

The Icelandic public service tax, introduced in 2009, is a special tax, included in the annual state budget. The level of the tax is fixed; that is, everyone with an income above a certain level pays the same sum, currently ISK 17,500 or about EUR 130 per person and year. The tax contributes to two-thirds of RÚV's revenues, while advertising accounts for the rest.
Since 2013, the Finnish public service company Yle is funded through a special public broadcasting tax: the Yle tax. This tax, outside the state budget, is income-based and corresponds to 2.5 per cent of a person’s taxable income. At most, one person pays EUR 163 per year. By law, the Yle tax is to be adjusted annually in line with changes in cost-of-living indexes. But already in 2015 an exception was made from the annual increase, and after a working group’s proposal in 2016, the index adjustment was frozen for the years 2017-2019. Nevertheless, for 2018, Finland’s parliament raised both the tax rate (from 2 to 2.5 per cent) and the free amount that determines when no tax has to be paid.
In Denmark, the licence will be phased out gradually over three years. From 2022, the allocations to public service media are included in the state budget, and financed by reducing the basic tax deduction for all Danes aged 18+. At the same time, the allocation to DR is to be gradually reduced by 20 per cent over five years. The decision on the new model was taken in March 2018 (in Danish), and was followed up in the media policy agreement for 2019-2023. Following the elections to Folketinget (Denmark’s parliament) in June 2019, there is no longer a political majority supporting the media agreement, and negotiations for a new agreement are expected in spring 2020.
In Sweden, the public service media companies – SVT, SR and UR – have tax-based funding since January 1, 2019, following a decision by the Riksdag (Sweden’s parliament) in 2018. As in Finland, it is a special public service fee, kept outside the state budget. The fee corresponds to one per cent of a person’s taxable income, with a ceiling of SEK 1,347 (approximately EUR 130) per person and year. The Riksdag decides on the allocation of fees to the programme companies for the whole licence period, which replaces the previous annual assessments.
For Norway, a public service tax will replace the licence fee from 2020. The tax will be income-related and, as in Denmark, financed by a reduction of the basic deduction. The reduction corresponds to a real tax of NOK 1,700 (approximately EUR 175) per person per year – as a ceiling. The NRK budget is included in the state budget, but will be stretched to cover four years at a time. The new financing model was suggested in the Government’s media proposal in March 2019 and was adopted by the Storting on 11 June (both links in Norwegian).

Note: This text is about individual taxes. In Finland and Iceland legal entities are also covered by a tax liability, while the systems in Denmark and Sweden are based on individuals only.