OSLO – Sitting in his lakeside mansion in the Swiss city of Lucerne, Borger Borgenhaug misses his grandchildren and the smell of the North Sea on a clear summer night.
Real estate mogul-turned-carpenter says that’s the price he pays Escaping Norway’s enhanced wealth taxIt has an annual tax Taking hundreds of millionaires abroad At the same time, it has maintained one of the most equal societies in the world.
“The political climate in Norway has become increasingly hostile toward business owners,” Borgenhaug, who left in 2022, told Reuters.
With a wealth tax dating back to 1892, and a culture of transparency that allows citizens to view others’ tax returns, Norway has more experience than most other countries in taxing the wealthy. His model offers lessons for Countries are discussing similar measures, from Britain to France to Italy Or even a city like New York.
The point is that a wealth tax will scare off some millionaires, but if imposed on a large enough scale, the revenues would still be worth it.
he The wealth tax was one of the big issues in the Norwegian elections in Septemberwho returned to power Labor Party. During his previous term, the force increased this tax burden and Tight rules for those who decide to move abroad.
Currently, individuals pay a 1% on net worth What’s up? 1.76 million to 20.7 million kroner (Between 174 thousand and 2 million dollars). From 2022 assets Above this limit they pay 1.1%.. In 2023, 671,639 taxpayers – About 12% of the population – paid this tax.
The regulations include several deductions: Main residence Tax is charged only on 25% of its cadastral valuewhile Stocks and commercial real estate They do it about 80%. the Assets abroad Also considered, though Debts can be deducted.
It has become more expensive to leave the country. When moving abroad, Norway applies A 37.8% departure tax around Unrealized profits That exceeds 3 million kroner (about $300,000). This includes, for example, appreciating stocks whose prices have risen but have not yet been sold. Moreover, the legal loopholes that allowed Postponing payment indefinitely This tax was canceled in 2024.
The new rules accelerated immigration. According to conservative think tank Civita, 261 residents with assets exceeding SEK 10 million (about $973,000) left the country in 2022 and 254 in 2023That is more than double the annual average before fiscal tightening.
This phenomenon is also reflected in the arrangement The 400 richest people in Norway: 105 already live abroad Or transfer their assets to their relatives who reside outside the country. As a sign of protest, a small left-wing opposition party displayed pictures of these millionaires in… “Wall of shame” At its headquarters.
Proponents claim that the tax acts as a redistribution subsidy In a country that abolished the inheritance tax in 2014, it is considered one of the richest countries in the world thanks to oil, shipping, and fishing.
Norway transfers all oil and gas industry revenues into a sovereign wealth fund and caps annual withdrawals at 3% of the fund’s value under a self-imposed tax rule.
This means that you need to look for other sources of income.
“The wealth tax makes the personal tax system as a whole more progressive than the income tax alone,” Deputy Finance Minister Ellen Reitan told Reuters.
Income from this sector has increased despite the mass displacement and now stands at 0.6% of GDPThis is a significant number. In this context, the British Labor Party government seeks to provide savings of the same size to achieve its financial goals.
Research conducted by Statistics Norway shows that entrepreneurs have sufficient liquidity to pay, and that The burden falls overwhelmingly on the rich. Another study suggests that the tax could do just that Stimulating investment in human capital.
Norway remains One of the most egalitarian countries in the world and ranks highly in ease of doing business.
“These results suggest that a wealth tax does not directly hinder investment or employment at the corporate level,” said Roberto Iacono, a professor at the Norwegian University of Science and Technology (NTNU).
A poll conducted by the Aftenposten newspaper response agency ahead of the September elections showed that 39% of Norwegians wanted to keep or increase the wealth taxWhile 23% called for its reduction and 28% called for its abolition.
The Norwegian Labor government is seeking to reach a major agreement on tax reform over the next two years, and is inviting all parties to the negotiating table. Trap? The wealth tax remains in place in one form or another.
Critics say this model penalizes national ownership and risks undermining Norway’s business base.
“The wealth tax system makes it difficult for companies to compete with the rest of the world,” said Knut Erik Carlsen, who made his fortune in fish oil supplements and recently moved to Switzerland.
Norway Taxes on capital gainsUnlike Switzerland It imposes higher taxes on labor than the OECD average..
About 40% of immigrants are business owners, according to Princeton University researcher Christine Blandhall, who estimates that, The latest tax changes will reduce Norway’s production by 1.3% in the long term. Others believe that the tax Harms business performance.
The estate tax is especially painful for startup founders, who pay down capital long before profits arrive.
Trasdal left Norway in 2000 to market European mobile technology in the United States, and later founded and sold several technology companies, including the app now known as iHeartRadio.
“I would not have had the opportunity to build in Norway what I built in the United States,” he said.
OECD data shows that Norway has one of the lowest levels of venture capital as a share of GDP in Europe: half that of Sweden and far behind the United States.
Heirs often leave before assuming control of the shares. Lawrence Odvigil, now in Singapore, says staying put could have cost him control of his shipping group during the recession that followed the 2008 global financial crisis.
“I didn’t want to let our company go bankrupt during my tenure because we didn’t have the capital,” he said.
yet, No new country followed Norway’s path.
French lawmakers have scrapped a 2% tax that would draw attention to wealth over €100 million. It opted instead to impose limited fees on personal assets held in holding companies, a measure that is expected to raise just €1 billion.
And on the other side of the canal The British Labor government has ruled out a formal wealth taxBut he insists he will continue to rely on those with “broad shoulders.”
ItalyFor her part, she is still sensitive to the increase in inheritance, but she is And quietly tightening its tax regime on wealthy foreigners.
Meanwhile, millionaires continue to tap their feet. Norway is on track to lose another 150 millionaires this year, a major departure for a country with a population of just 5.6 million, according to Henley & Partners, which advises wealthy clients on relocation, and New World Wealth, which relies on public sources such as LinkedIn.
Britain tops the global list with 16,500 planned departures after canceling tax exemptions for foreign residents. The United Arab Emirates, the United States and Italy are among the countries that have made the greatest progress.
Norway’s social cohesion and oil wealth may make its model difficult to imitate. But economists say this indicates that any tax of this type involves a balance between economic and political dimensions.
“Not imposing a wealth tax widens inequality; having a tax implies less wealth capital Start-upssaid Professor Iacono of NTNU. “Politics needs to find a balance.”
by Francesco Canepa and Terje Solsvik