Hundreds of millionaires are leaving Norway for other countries to escape the government’s wealth tax. At the same time, tax revenues help authorities maintain basic services and reduce inequality. It is a model that has inspired discussions about similar rates, from the UK to France, and even in New York.
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Borger Burgenhaug, a carpenter turned real estate mogul, left the country in 2022 and now lives in the Swiss city of Lucerne. In an interview with Reuters, Borgenhaug said the political climate in Norway has become increasingly hostile to business owners.
The country has more experience than most in tightening its grip on the rich, thanks to a wealth tax dating back to 1892 and a culture of transparency that allows citizens to check other people’s income tax returns.
According to the report, the tax was a crucial issue in the Norwegian elections in September, which returned the Labor Party to power. The party had raised fees and tightened exit rules during its previous term.
Data from conservative think tank Civita cited by Reuters show that 261 residents with assets of more than 10 million kroner ($973,000) left the country in 2022 and 254 in 2023, more than double the usual rate before the increase.
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With the increased rate and stricter rules, individuals pay 1% on net worths between 1.76 million and 20.7 million kroner (equivalent to 174,000 to 2 million US dollars, respectively), and since 2022, 1.1% above this amount.
Exactly 671,639 people – about 12% of the population – paid the tax in 2023.
In addition, leaving the country triggers an exit tax of 37.8% on unrealized capital gains in excess of 3 million kroner – such as notional gains on shares that have appreciated in value but have not yet been sold. Loopholes that allowed immigrants to defer payments indefinitely will close in 2024.
Capital Business magazine’s ranking of the 400 richest Norwegians shows that 105 of them now live abroad or have transferred their wealth to relatives living abroad.
The report adds that supporters of the tax say it acts as a kind of redistribution lock in a country that abolished the inheritance tax in 2014 and is considered one of the richest countries in the world thanks to oil, maritime transport and fishing.
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All oil and gas industry profits go into a sovereign wealth fund and annual withdrawals are capped at 3% of the fund’s value, under a self-imposed tax rule. Therefore, Norway needs to find other sources of income.
Despite the exodus of millionaires, revenue from the wealth tax now amounts to 0.6% of GDP. Research by Statistics Norway shows that entrepreneurs have enough cash to pay the tax and that the burden falls largely on the rich. Another study suggests that the tax could stimulate investments in human capital.
Speaking to Reuters, Robert Iacono, a professor at the Norwegian University of Science and Technology (NTNU), points out that these findings suggest that a wealth tax does not directly harm investment or employment at the firm level.
Norway remains among the most equal countries in the world and appears highly ranked in ease of doing business.
A poll conducted by the Aftenposten newspaper response agency, ahead of the September elections, showed that 39% of Norwegians want to maintain or increase the wealth tax, while 23% want to reduce it, and 28% prefer to abolish it.