By Elin Brimheim Heinesen
With approximately 93% of the Faroe Islands’ exports being fish products (2021), many have the impression that the fishing and fish farming industry is almost solely responsible for sustaining the country and enabling us to survive on the islands. But is this correct? This perception is also why some believe these industries hold a special status and therefore should not have the same obligations as other industries. But is this justifiable? At the risk of offending some, I want to point out that it is a misconception to believe that the welfare of the Faroe Islands is almost exclusively maintained by the values created by the fishing and fish farming industry, and to question the view that these industries deserve preferential treatment over others.
Don’t get me wrong. The fishing and fish farming industry generates significant value, which the country certainly benefits from. However, the values that we all live off are not only created through the export of fish products and the money we earn from selling these products to other countries. These values are also created domestically by other industries or within the public sector, entirely independently of exports. It is not only through exports that an industry can determine its value or contribution.
Welfare in the Faroe Islands is Not Solely Dependent on Fishing and Fish Farming Industries
Many believe, for instance, that these industries bear the biggest burden when it comes to funding public services through taxes and duties. However, this is not entirely accurate. If we examine where public revenue originated from during the years 2017-2021, we find that, on average, only 6.1 percent came from taxes and duties on fishing and fish farming businesses. A significant 93.9 percent of public revenue came from other businesses, regular employees, and through VAT. Therefore, the public sector does not mainly rely on the fishing and fish farming industries, and Faroese welfare is not solely built on these industries. In reality, Faroese people rely much more on values created in other sectors than in the fishing and fish farming industries.
This should not be seen as an underestimation of the importance of the fishing and fish farming industries to society. I simply want to highlight that other forms of value creation in the country also contribute to maintaining society – in fact, to a greater extent than the fishing and fish farming industries. However, their significance is often underestimated. It is not surprising that fishing and fish farming industries are considered the most important in the minds of the Faroese. In economic debates, fishing and fish farming dominate the media and politics – not least historically. It’s as if nothing else matters. But it certainly does.
Do not Pay More Tax than Others
Some might say: “But the fishing and fish farming industries create many jobs, and therefore many employees who pay taxes.” This suggests that more revenue must come to the country from these industries, above the 6.1 percent, from those working in the field, as they also pay taxes. It is true that the fishing industry creates jobs and thus taxpayers, like other industries, but not as many jobs as often believed. Let’s look at how many people work in the fishing and fish farming industries. Out of a workforce of about 33,000 employees in the Faroe Islands (2022), approximately 4,000 people work in fishing and fish farming, including fish processing. In 2022, 1,362 people worked in fishing, 1,386 in fish farming, and 1,253 in fish processing. Therefore, the fishing and fish farming industry comprises 15% of taxable employees, while the service and construction sectors collectively account for 85% of taxable employees.
Some may also argue: “Yes, but wages in the fishing and fish farming industries are much higher than wages in other sectors—therefore, they must pay more taxes, even if they are fewer.” But no, not quite. The industry does not pay as high wages as one might think. It is true that 15% of the workforce works in fishing and fish farming and that they receive nearly 24% of salary payments, so some must earn well. However, seafarers and other employees in the fishing and fish farming industries generally do not earn much more than others.
In December 2022, the wage distribution was such that the fishing and fish farming industries accounted for 23.75% of total wage payments (256.5 million DKK) in the country, while all other industries and services accounted for 76.25% (823.1 million DKK). However, this does not indicate the distribution of tax payments – i.e., how much workers in the fishing and fish farming industries pay in average tax compared to workers in other industries.
All workers would be equal if everyone paid the same tax on the same salary. But this is not the case. Some of the country’s wealthiest businesspeople, who earn the most, do not pay taxes. Among seafarers, crew shares are higher on some ships than on others, but on average, seafarers’ wages are not significantly higher to make a substantial difference – not compared to what the rest of the country’s workforce pays in taxes. Many seafarers – particularly in the pelagic fleet – earn a lot and also pay considerable taxes, but many do not. Many are in support systems and work in an industry with tax advantages like DIS, NIS, and FAS. These are opportunities that other workers do not have. Faroese who sail under other flags or work in other countries do not pay taxes in the Faroe Islands.
In conclusion, the tax revenue in the Faroe Islands comes significantly more from workers in other industries than from workers in the fishing and fish farming industries.
Do the Fishing and Fish Farming Industries Have the Right to Better Conditions Than Other Sectors?
No. The Faroese naturally benefit indirectly from the fishing and fish farming industries to some extent, as employers and workers in these industries spend part of their income on goods and services. But this is true for others in the workforce as well, who still make up the majority.
Some may argue that because the fishing and fish farming industries make significant investments in company buildings, equipment, and production tools/ships, this also creates jobs and income for the country. While this is partly correct, as confirmed by the figures mentioned above, they contribute far less to the state treasury than other sectors. This does not alter the fact that the fishing and farming industries are not the main sectors sustaining the country.
The argument that the fishing and fish farming industries are almost the sole providers of welfare in the Faroe Islands is used by many to defend the special privileges these industries enjoy. They believe these industries should have better conditions than all other sectors because they are somehow “particularly valuable to the Faroe Islands.” “Just think of all the investments these industries make, which contribute to growth and valuable jobs,” they say.
Few New Jobs Are Being Created Seen in Relation to the Industry’s Extraordinary Profits
It’s important to note that when the relatively few employers in the fishing and fish farming industry invest, these investments don’t directly create more jobs. Often, it’s the opposite. Investments mainly go into advanced technology that automates and increases the efficiency of fish production, allowing for higher output and revenue without significantly increasing the workforce. In some cases, there may be no new jobs created at all.
The fact that few new jobs are created in the fishing industry is evident when considering the decrease in the number of people directly employed in fishing over the last 40-50 years. Although the number has increased slightly in some areas recently due to expanded activity, the long-term trend shows a reduced workforce. Forty years ago, almost every village had its own fish fillet factory. This is no longer true. Now there are only a few, but larger, fish fillet factories, and the overall number of people employed in these factories has significantly dropped. For example, in the 1960s, about 7,000 people worked in the fishing fleet; today, that number is down to around 1,300.
Despite this, the fishing sector has never created as much value as it does now, generating significant profits with relatively few employees. One might think that increased revenue from larger and cheaper production would result in higher wages for current workers. However, what we see is that employers are not paying much more in salaries overall, nor have they created many new jobs in recent years, especially when considering the substantial and extraordinary profits that efficiency gains and free access to resources have provided to industry players.
The majority of the surplus from the extraordinary profit ends up in the employers’ pockets and significantly in the shareholders’ pockets through dividends. Consequently, the average Faroese person sees little of this wealth and benefits even less from it, as a substantial portion goes to foreign shareholders who own most of the businesses. These foreign shareholders can enrich themselves and accumulate wealth, sometimes in offshore tax havens, where the money never benefits the Faroese society or people.
Privileges – Not Skills – Create Abnormal Profits
One last myth that people should be aware of is simply a myth and not reality, is the myth of pelagic fishing companies and natural resource rent. People believe that these companies have earned the large, abnormal profits they’ve achieved in recent years because “they are just exceptionally skilled.” They think it’s unfair for the state to impose fees on these companies for the right to fish.
But that’s not the case. This misunderstanding likely arises from the state’s intention to impose fees for “licenses,” but it doesn’t mean that the entities are paying for the permission to fish or to use fjords for fish farming. No, they are paying for the privilege of having exclusive access to natural resources. And for having fishery surveillance to keep other entities from extracting value from these resources.
If everyone had free access to extract value from these resources, the current fishing companies wouldn’t have achieved such high abnormal returns as they have. Ordinary people might then understand that these companies are not much better at exploiting resources than many others, contrary to some beliefs. Achieving such abnormal returns (also known as natural resource rent) is only possible when a few companies are given the exclusive rights to utilise almost all natural resources.
The Faroe Islands have a very rich natural environment, which is incredibly valuable. When a country like ours grants exclusive rights to a few to exploit these valuable resources, it naturally results in these few companies making profits many times greater than businesses in other industries without such privileges. This discrepancy has very little to do with skill. It is not ability but primarily the exclusive rights granted to these companies that create the abnormally high profits. These rights provide them with extra returns from natural resources that were originally accessible to everyone. Now, only a select few have permission to exploit everything, with these exclusive rights held through 12-year rolling permits, which, in practice, means indefinitely.
Is it Envy to Not Want to Give The Fishing Industry More of the Profits?
There’s nothing strange or unfair about the state (on behalf of taxpayers) asking for reasonable compensation for the right that everyone else thereby loses. “But look at Bakkafrost. The company paid a whole 740 million DKK in tax in 2022. Isn’t that good?” some might argue. Yes, it’s good, but as a percentage, the company hasn’t paid as much as ordinary people are forced to pay from their incomes. Ordinary people also receive no special treatment just because they argue, “But I need to pay less tax because I need the money for investments.” No, that’s not how it works.
Some say that it’s envy that leads us to not wanting to give businesspeople more of the profits. No, it’s not about denying skilled businesspeople the earnings they have created alongside their competent staff. It’s about the fact that the exclusive right to extract resources is what has created the extraordinary returns, so why not share these extraordinary returns with those who granted them this exclusive right? That’s the issue at hand.
It’s about social responsibility and solidarity. Why shouldn’t those who benefit from these privileges be able to give a reasonable share to those who provided them this opportunity? It’s only fair that taxpayers receive compensation so we all benefit from the extraordinary profits, which could pay for significant tax cuts for the population, much-needed improvements in public services, and several underwater tunnels to Suðuroy, if desired—or whatever other benefits the billions could fund. Why should others cover the bulk of the cost for all public services—such as education, social services, and healthcare, which none of us can live without?
Hans Jákup Mikkelsen, director at Marine Harvest, wrote the following on in.fo on 12th March 2018:
“A fisherman also has children who go to school – a fisherman also gets ill and needs medical help, and a fisherman also grows old and needs care. Therefore, he should contribute financially to cover these needs, just as landlubbers do. A fisherman, like anyone else, can end up being one of those with the least. By paying taxes, all citizens are given as equal opportunities as possible – in terms of education and employment, healthcare, and elderly care. This provides citizens with greater freedom to take initiatives and create value. Thus, we also care for those with the least, and society becomes more just. However, justice in this world is unfortunately dictated by the ruling class. When the ruling class gets tax cuts, while those with the least live in poverty, we are not building on Christian values.”
No One Works a Hundred Times More than Anyone Else
I would like to end with these questions: What is a fair compensation for only a few having the exclusive right to enrich themselves to billionaires from resources that everyone once owned but now has lost free access to? Everyone else also works and creates great social value, which we all benefit from, but they do not have the same privileges. They get nothing for free and have to pay full taxes on what they earn.
Shouldn’t the same rules apply to the billionaires in the fisheries and fish farming industries? And if not, why not? Society also supports these billionaires when they need help. Why should they not finance the welfare and security of everyone in the country to the same extent as everyone else who also creates value and pays taxes? When all of these people have been so generous as to give them the privileges they have received, why shouldn’t they have the same obligations and pay the same percentage in taxes as others who have given them the opportunity to become billionaires?
We are all “shareholders” in society and all contribute to creating value for the whole community, each in their own way – even the smallest and weakest, whose needs create jobs for others. So why not let everyone get a fair share of the total value creation in society? Let’s just call it “dividend” as well. No one works a hundred times more than anyone else. So why should some receive hundredfold sums compared to others who may work just as hard, if not harder, but who do not get any share in the returns from the values they have helped to create?
Update 31 March 2023:
Following a discussion on Facebook about the above article, where people pointed out that they believed fish exports are still the primary pillar supporting the country, I responded as follows:
Exports are indeed significant, but they are not the only crucial factor for maintaining our welfare state, as many might think. This underestimates the importance of all other industries.
Some people seem to believe that the Faroese only live on foreign currency, but this is a misconception. Yes, it is definitely important not to have a trade deficit for too many consecutive years, as this would lead to problems. There will naturally be a crisis if we consistently spend more than we produce or import goods of higher value than we export over an extended period. This would, of course, undermine the economy in the long run.
However, this does not mean that we live solely off trade balance surpluses. Everything we create in the Faroe Islands has value and contributes to our wealth—not just fish. So, yes, we do have a “money machine” in the Faroe Islands, just like other countries have their “money machines” they rely on. Money is not only created through foreign trade.
If this is hard to understand, one can imagine a country that is completely self-sufficient in all the goods its population needs. In such a case, exports become less crucial because all the values that the population lives on are created within the country’s borders. Therefore, production that is not exported also has value and significant importance for the country’s welfare.
Many industries can help the Faroe Islands flourish, but poor management can also bring them to their knees. This isn’t limited to the fishing and fish farming sectors; banking and construction can also have significant impacts. For instance, an expensive tunnel to Suðuroy could easily bankrupt the nation. Furthermore, if educators don’t receive fair wages for caring for children and go on strike, it could cause widespread disruption, preventing others from working and negatively affecting the economy.
However, some people seem to believe that everything depends solely on the fishing and fish farming industries. They imply that fishermen are the only ones working hard for the Faroe Islands, while others contribute little and rely on the fishermen’s efforts. This view was illustrated in a leader article by Jóhann Lützen in Norðlýsið on 30 March 2023, titled “A Fisherman Feeds Eight Educators.”
My criticism of this perspective does not mean I have any less respect for fishermen. I deeply admire the hard and incredible work done by Faroese fishermen. They are indispensable, and I am proud that we have such skilled seafarers on the Faroe Islands. My point is that I also respect other professions in the Faroe Islands, which, alongside the fishing and fish farming industries, contribute to creating the value that supports the Faroese welfare society. We also need other industries and services to maintain a well-functioning welfare state.
Many people tend to undervalue other industries, believing that only the fishing and fish farminge sectors keep the Faroes going. This is simply not true. The value created by the fishing and fish farming industry is very important for Faroese society, but surely it is not forbidden in the Faroe Islands to point out that other industries also contribute value that is important to us all. Why on earth interpret this as a lack of respect for the fishing and aquacultur industry?
