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The government of Norway has proposed a temporary change to tax rules for oil firms. The move is part of a bid to prevent investments collapsing as an effect of the Covid-19 pandemic, Prime Minister Erna Solberg said.

According to Reuters, the plan could boost oil firms’ liquidity by as much as $9.7bn (Nkr100bn) across this year and next year.

The new tax regime would allow companies to write-off investments more quickly. Companies will also be allowed to effectively postpone tax payments until later years.

Solberg was quoted by the news agency as saying: “Even if the government pursues a policy of becoming less dependent on oil, it’s important to prevent the current crisis from making the decline so rapid that we lose key competence that will help the transition.”

Norway is one of the biggest producers of oil and natural gas in Western Europe. It is responsible for about 2% of global crude output.

The Covid-19 pandemic has severely hit Norway, due to the plunge in oil demand it has caused.

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By GlobalData

However, the plan does not change the headline tax rate of 78% paid by oil firms on profits in Norway. By increasing deductions on new investments, the taxable profits will be reduced in the next several years.

Solberg added: “The way out of the crisis is about becoming greener, creating jobs and be competitive.”

She said the government will at a later stage restructure its plan to help the transition to a greener economy.