Economist Criticizes Political Responses to Iran Conflict, Highlights Inefficiencies of Proposed Tax Cuts
Oslo, Norway – March 25, 2026 – Harald Magnus Andreassen, Chief Economist at Sparebank 1 Markets, has voiced skepticism regarding recent political proposals to cut fuel taxes and food VAT in response to escalating tensions in the Middle East following attacks between Israel and Iran. Andreassen argues that such measures are poorly targeted and would disproportionately benefit higher-income individuals.
Ineffective Tax Cuts
Following attacks initiated by Israel and the United States against Iran and subsequent missile responses from Iran, several political parties have proposed tax relief measures. The Conservative Party has suggested removing the road use tax for five months, although the Progress Party (FRP) advocates for a reduction in food VAT. Andreassen dismissed these proposals as “pointless from the point of view of an economist who wants rational measures.”
Disproportionate Benefits to the Wealthy
Andreassen contends that cutting VAT on food primarily benefits those with higher incomes, as they spend more on groceries than lower-income households. Similarly, he argues that reducing fuel taxes would provide a greater financial advantage to individuals who drive more frequently, typically those with higher earning potential. “You could rather raise the food VAT to 25 percent, and supply tax relief to those who earn the least,” Andreassen stated. “The VAT cut helps me and others who earn well.”
Alternative Solutions for Targeted Relief
Instead of broad-based tax cuts, Andreassen suggests more targeted approaches to assist those most in need. He proposes reducing taxes for low-income groups or increasing pensions as more effective ways to provide financial support. He emphasized that the current proposals fail to address the core issue of affordability for vulnerable populations.
Limited Impact of Swedish VAT Reduction
Referring to Sweden’s recent decision to halve its food VAT, Andreassen noted that the impact on price competitiveness with Norway is limited due to currency fluctuations. He explained that the exchange rate has shifted, making Swedish prices relatively more expensive for Norwegian consumers, effectively offsetting the VAT reduction. “So it is just as profitable or unprofitable to shop in Sweden now as it was in 2021,” he said.
Fuel Consumption and Income Disparity
Andreassen further pointed out that higher-income individuals consume significantly more fuel than lower-income individuals, driving 2.5 to 3 times as many kilometers. Reducing fuel taxes would disproportionately benefit those who can already afford to drive more. He believes that a more equitable approach would involve direct assistance to those struggling with fuel costs.
Concerns Over Premature Intervention
Andreassen cautioned against implementing measures in response to a rapidly evolving situation, emphasizing the need for a measured approach. He expressed concern that premature interventions could create unintended consequences and benefit consumers in countries that cannot afford similar measures. He stated, “There is reason to have ice in your stomach, and see if it gets so bad that crisis measures are needed.”
Source: E24
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