A record number of Norway's richest people have fled since the Labor Center coalition raised wealth tax rates by 0.1 percentage points . Photo: Natnan Srisuwan/Moment RF
“A difficult choice has been made. I moved from Asker, Norway to Lugano, Switzerland,” Kjell Inge Røkke, Norway’s largest taxpayer and largest shareholder in investment firm Aker ASA, wrote to the rest of the board in an open letter last September.
G- Røkke, an industrial tycoon with an estimated wealth of NOK 19.6 billion (£1.5 billion), is among the 50 billionaires and millionaires who have fled Norway over the past year due to higher wealth taxes.< /p>< p>A record number of the country's richest residents have fled since the Labor Center coalition raised wealth tax rates by 0.1 percentage points, costing the government tens of millions in lost tax revenue. According to the Norwegian newspaper Dagens Naeringsliv, 50 highly paid people with a combined wealth of more than NOK 40 billion (£3 billion) exceed the total number who have left the country for Switzerland since 2009.
It is expected that due to For the tax raid, which began in November last year, even richer Norwegians will leave.
The exodus from Norway, one of four OECD countries that still impose a wealth tax, could be seen by the Treasury as Labor debates ways to get the rich to pay more taxes in the UK. Sir Keir Starmer is believed to be considering various forms of wealth taxation, including a capital gains tax raid and the elimination of various tax exemptions for the wealthy if Labor wins the next election.
Wealth tax will hit European countries
Norwegian wealth tax has long been a thorn in the side of the country's super-rich people. It is one of the few OECD countries that imposes a wealth tax on the global net worth of its citizens, defined as total assets minus total debt.
In 1990, 12 OECD countries, all in Europe, levied wealth taxes. However, most of them canceled them in the 1990s and 2000s due to growing fears that in a globalized world, the rich would simply move their wealth elsewhere. France was the last country to waive a wealth tax in 2017, losing about 60,000 millionaires between 2000 and 2016, according to a study by analyst firm New World Wealth.
Now it is the only European country to levy a wealth tax. they are Norway, Spain and Switzerland.
This is despite wealth taxes collecting surprisingly little for the government. Only a tiny fraction of Norway's tax revenue — about 1%, according to the OECD — comes from taxes on wealth. Dan Neidl of Tax Policy Associates, a non-profit organization, said: «Norway is probably the developed country with the highest wealth tax, but it's still not very significant.»
Part of this is due to discounts. which apply to the main residence and unregistered shares.
Mr Nidle said the rules have a «strange distorting effect» on behavior. “This creates an incentive to avoid listing your business and invest as much of your own capital as possible in your home. These are not very good results in terms of politics.”
Under Norwegian tax policy, an individual with a worldwide net worth over NOK 1.7m (£130,000) is taxed at 1% on anything above this threshold. Of this tax collection, 0.3% goes to the state and the remaining 0.7% goes to the individual's municipality. Those with more than NOK 20 million (£1.5 million) pay 1.1 percent. That extra 0.1% goes to the state.
Mr Røkke gave no financial reason for the move, adding that while Lugano is «not the cheapest and doesn't have the lowest taxes», it is «a great place with a central location in Europe.»
Taxes on wealth in Europe
Other wealthy people who have recently left Norway include Tore Ivar Slettemoen, co-founder of Feyr battery company, and Ninja Tollefsen, daughter of real estate investor Ivar Tollefsen. Fredrik Haga, the 31-year-old co-founder of cryptocurrency company Dune, also left for Switzerland. Mr Haga, who has invested most of his fortune in the fast-growing company, told the Financial Times he is worried his next tax bill will be several times his disposable income.
It may seem strange that so many Norwegians move to Switzerland, a country that has its own wealth tax. In fact, Switzerland receives even more from wealth taxes than Norway — about 4% of total tax revenue. However, the country offers offers for foreigners that put it at the top of the list of rich people looking for a new home.
In some Swiss cantons, a person who lives but does not work in Switzerland can choose a favorable a lump sum tax based on their spending and standard of living, not their worldwide income and assets.
In a desperate attempt to stop large taxpayers from leaving the country, Norway said it was exploring the possibility of introducing an «exit tax», whereby individuals are taxed on their saved capital income at the time they leave the country.
His government had already taken a major step to stop the exodus of the country's richest people when last November it lifted the «five-year rule» which meant wealthy Norwegians could sell their shares tax-free if they lived. abroad for over five years.
Norway has been led by a Labor Center coalition government since the parties won a landslide victory in September 2021, ending eight years of Conservative Party rule led by Erna Solberg.
The centre-left government's state budget last fall, which raised taxes on wealth, was welcomed by many on the left. Jonas Gahr Støre, the prime minister, told his Labor Party members at a national meeting in September: “A change of power in a society never happens without friction and some noise. A fairer tax system challenges those who have the means but are unwilling to contribute more to society. We need to be prepared for this.”
The OECD has warned that taxes on wealth have a negative impact on long-term growth, hurting entrepreneurship and risk appetite.
There are growing fears in Scotland that a 1 percentage point increase in the top two income tax rates will lead to a «brain drain» across the border. This month, the higher tax rate in Scotland increased from 41% to 42%, and the additional rate rose from 46% to 47%. For comparison, the additional rate in England is 45 per cent.
0704 Scotland Tax rate in England
Members of the Labor Party openly called on Sir Keir to introduce some form of wealth tax. The Labor leader denies he plans to introduce such a policy, but plans to target forms of wealth nonetheless.
Sir Keir wants to remove private schools' charity status, meaning they will lose their VAT exemption, a move that will cost families thousands of pounds a year in private school fees. A family who currently pays £31,310 a year to send their two children to a private school will see their bills rise by £6,262 a year if the VAT exemption is cut, according to investment firm Waverton.
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The party has also pledged to abolish «non-home status», which allows UK residents living abroad to avoid paying UK tax on overseas income. It is believed that Labor will significantly shorten the window from the current 15 years until status expires. Tax experts have warned that the reduction in status could drive the economic elite out of the country.
Clearly, Labor also wants to raise the tax on second homeowners, blocking them from a planned council tax freeze and raising capital gains tax rates in line with Income tax rates.
Regarding the proposed wealth taxes in the UK, Mr Neidl said: “We don't really know what the implications of these taxes will be. But if existing wealth taxes are hurting growth, more ambitious wealth tax proposals are likely to hurt even more.”
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