“A troublesome selection has been made. I’ve moved from Asker, Norway, to Lugano in Switzerland,” Norway’s greatest taxpayer, and the biggest shareholder of funding agency Aker ASA, Kjell Inge Røkke wrote to the remainder of the board in an open letter final September.
Mr Røkke, an industrial tycoon with an estimated web price of Nkr 19.6bn (£1.5bn), is amongst 50 billionaires and millionaires to have left Norway over the previous 12 months as they had been hit with increased charges of wealth tax.
Document numbers of the nation’s richest residents have fled for the reason that Labour-centre coalition elevated wealth tax charges by 0.1 share factors, costing the federal government tens of tens of millions in misplaced tax income. The 50 excessive earners, with a mixed web price of greater than Nkr 40bn (£3bn), make up greater than the entire quantity who’ve left the nation for Switzerland since 2009, in accordance with Norwegian newspaper Dagens Naeringsliv.
It’s anticipated that much more rich Norwegians will depart due to the tax raid which kicked in final November.
The exodus from Norway, which is one in all simply 4 within the OECD to nonetheless impose a wealth tax, could also be observed by the Treasury as Labour discusses methods to make the wealthy pay extra tax within the UK. Sir Keir Starmer is believed to be contemplating varied types of wealth taxation – together with a capital good points tax raid and a removing of varied tax-free exemptions for the wealthy, ought to Labour win the following election.
Norway’s wealth tax has lengthy been a thorn within the aspect of the nation’s super-rich. It’s one in all solely a handful of OECD international locations to impose a wealth tax on the worldwide web price of its residents – outlined as complete belongings minus complete debt.
In 1990, 12 OECD international locations, all in Europe, levied wealth taxes. Nonetheless, most of them repealed these within the Nineties and 2000s on account of rising fears that in a globalised world the rich would merely take their riches elsewhere. France was the final to scrap its wealth tax in 2017, after shedding an estimated 60,000 millionaires between 2000 and 2016, in accordance with analysis by intelligence agency New World Wealth.
Now the one European international locations to levy a wealth tax are Norway, Spain and Switzerland.
That is although wealth taxes increase surprisingly little for the federal government. Solely a tiny proportion of Norway’s tax take – about 1pc, in accordance with the OECD – comes from wealth taxes. Dan Neidle of Tax Coverage Associates, a non-profit, stated: “Norway might be the developed nation with probably the most vital wealth tax, however it’s nonetheless not very vital.”
That is partially on account of reductions that apply to major residence and unlisted shares.
Mr Neidle stated these guidelines have some “weirdly distortive results” on behaviour. “That creates an incentive to keep away from itemizing your corporation, and put as a lot of your web price into your home as potential. These are usually not nice outcomes from a coverage perspective.”
Beneath Norway’s tax coverage, a person with worldwide web wealth above Nkr 1.7m (£130,000) is taxed at 1pc on every little thing above this threshold. Of this tax take, 0.3pc goes to the state and the remaining 0.7pc goes to the particular person’s municipality. These with over Nkr 20m (£1.5m) pay a charge of 1.1pc. This further 0.1pc goes to the state.
Mr Røkke didn’t give any monetary causes for the transfer, including that though Lugano is “neither the most affordable nor has the bottom taxes” it’s “an excellent place with a central location in Europe”.
Different rich people who’ve just lately deserted Norway embody Tore Ivar Slettemoen, co-founder of battery firm Feyr, and Ninja Tollefsen, daughter of property investor Ivar Tollefsen. Fredrik Haga, 31-year-old co-founder of cryptocurrency knowledge enterprise Dune, has additionally gone to Switzerland. Mr Haga, who has most of his wealth tied up within the quickly rising firm, advised the Monetary Occasions that he was apprehensive his subsequent tax invoice can be a number of occasions his disposable earnings.
It might appear unusual that so many Norwegians are transferring to Switzerland, a rustic that has a wealth tax of its personal. In reality, Switzerland makes much more from wealth taxes than Norway does – making up about 4pc of the entire tax take. Nonetheless, the nation affords offers for foreigners that place it excessive on the checklist of rich people searching for a brand new residence.
In sure Swiss cantons, an individual who resides however not working in Switzerland can go for a beneficial lump-sum tax primarily based on their expenditures and lifestyle relatively than their worldwide earnings and belongings.
In a determined try and cease excessive taxpayers leaving the nation, Norway has stated it’s investigating the opportunity of an “exit tax” the place people are taxed on saved capital earnings the second they transfer in another country.
Its authorities has already taken a serious step to cease its wealthiest people flowing in another country when, final November, it repealed “the five-year rule” that meant rich Norwegians might promote their shares with out paying tax on the acquire if that they had lived overseas for greater than 5 years.
Norway has been led by a Labour-Centre coalition authorities for the reason that events gained by a landslide in September 2021 bringing to an finish eight years underneath its Conservative Get together led by Erna Solberg.
The centre-left authorities’s state finances final autumn, which raised wealth taxes, was welcomed by many within the left-leaning social gathering. Jonas Gahr Støre, the prime minister, advised his Labour Get together members at their nationwide assembly in September: “Shifting energy in society by no means occurs with out friction and a few noise. A extra honest tax system challenges these with means who don’t need to contribute extra to society. We’ve to be ready for that.”
The OECD has warned that wealth taxes have a adverse impression on long-term progress, damaging entrepreneurship and risk-taking.
In Scotland there are mounting considerations {that a} 1 share level rise within the two prime charges of earnings tax will result in a “mind drain” throughout the border. This month, the upper charge of tax in Scotland has elevated from 41pc to 42pc, whereas the extra charge has gone up from 46pc to 47pc. By comparability, the extra charge in England is 45pc.
Labour members have overtly referred to as on Sir Keir to impose some type of wealth tax. The Labour chief has denied he’s planning to introduce such a coverage, however he’s nonetheless planning to focus on types of wealth.
Sir Keir needs to take away non-public colleges’ charitable standing, that means they lose their VAT exemption – a transfer that might value households 1000’s of kilos a 12 months in non-public faculty charges. Based on funding agency Waverton, a household at present paying £31,310 a 12 months to place two youngsters by non-public faculty would see their payments go up by £6,262 yearly if the VAT exemption was lower.
The social gathering has additionally promised to take away the “non-dom standing” which permits UK residents who dwell overseas to not pay UK tax on abroad earnings. It’s thought Labour would considerably shorten the window down from 15 years, the present timeframe earlier than the standing expires. Tax specialists have warned that slashing the standing might drive the financial elite in another country.
It’s understood that Labour additionally needs to lift tax for second householders, by blocking them from a deliberate freeze on council tax and rising capital good points tax charges in step with earnings tax charges.
Of the proposed wealth taxes within the UK, Mr Neidle stated: “We don’t actually know what the impression of those taxes can be. But when present wealth taxes injury progress, then the proposals for extra bold wealth taxes would presumably be extra damaging.”