Economy of Svalbard

The economy of Svalbard is dominated by coal mining, tourism and research. In 2007, there were 484 people working in the mining sector, 211 people working in the tourism sector and 111 people working in the education sector. The same year, mining gave a revenue of 2.008 billion kr, tourism NOK 317 million and research 142 million. In 2006, the average income for economically active people was NOK 494,700, or 23% higher than on the mainland. Almost all housing is owned by the various employers and institutions and rented to their employees; there are only a few privately owned houses, most of which are recreational cabins. Because of this, it is nearly impossible to live on Svalbard without working for an established institution. The Spitsbergen Treaty and Svalbard Act established Svalbard as an economic free zone and demilitarized zone in 1925.

The Spitsbergen Treaty of 1920 established full Norwegian sovereignty over the archipelago. The islands are, unlike the Norwegian Antarctic Territory, part of the Kingdom of Norway and not a dependency. The treaty came into effect in 1925, following the Svalbard Act. All forty signatory countries of the treaty have the right to conduct commercial activities on the archipelago without discrimination, although all activity is subject to Norwegian legislation. The treaty limits Norway's right to collect taxes to that of providing services on Svalbard. Therefore, Svalbard has a lower income tax than mainland Norway, and there is no value added tax. There is a separate budget for Svalbard to ensure compliance. Svalbard is a demilitarized zone, as the treaty prohibits the establishment of military installations. Norwegian military activity is limited to fisheries surveillance by the Norwegian Coast Guard. The treaty requires Norway to protect the natural environment.

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