Saturday, May 18, 2024
HomeeuropeRich Norwegians flee fjords mountains for Swiss exile in rage about taxes

Rich Norwegians flee fjords mountains for Swiss exile in rage about taxes

OSLO – Some of Norway’s richest citizens are hoping for an electoral setback for the government this coming week as they rage at a fiscal regime that drove dozens of them into exile in Switzerland.

One of the world’s most prosperous diaspora has swapped the fjords for the Alps to escape a double whammy of higher wealth and dividend taxes since the minority cabinet of Prime Minister Jonas Gahr Store stepped in less than two years ago. 

Measures to further tighten the noose include stricter exit levies, and plans to ensure fiscal authorities can also capture the use of outlays for personal consumption through companies. 

Mr Tord Kolstad, an entrepreneur listed among Norway’s 400 richest people by local media, is among expatriates fuming at the clampdown.

“There are people coming down here every week from Norway, still,” he said in a phone interview from Lucerne in central Switzerland. “A lot of people do it because they feel they are forced. The main thing is the taxation system.”

While the plight of wealthy taxpayers hasn’t featured prominently going into local elections on Monday, a bad result for the government may thwart more fiddling with the fiscal regime before a national vote due in 2025. Conflict-of-interest scandals involving several ministers have hit support for the ruling parties.

The exodus from one wealthy snow-capped and lake-adorned European country to another showcases both the challenge for governments seeking to raise revenue from affluent individuals in a mobile world, and the clash of ideas such policies invoke.

Mr Store’s tax-the-rich push has pitted traditional Nordic concepts of equality and social justice against claims that the measures penalise success and hurt the economy.

The 63-year-old prime minister has called the emigration of wealthy people “a breach of a social contract”.

Mr Store is a rich man himself, having inherited money from his grandfather’s sale of the Jotul stove maker. He took out 2 million kroner (S$255,500) in dividends last year, “probably to cover wealth tax”, the Finansavisen business paper reported in June. 

Mr Kolstad, by contrast, has a self-made fortune. The entrepreneur started investing in property as a 19-year-old in his hometown Bodo in northern Norway, and now owns 230,000 sq m of commercial property and 240 apartments through T Kolstad Eiendom AS, according to Kapital, a business magazine. 

His net worth grew 38 per cent to 2 billion kroner last year, according to the magazine’s calculation. 

“My value is not in owning money, it’s in factories, houses, buildings,” he said. “I still have to pay 2 per cent or 3 per cent a year to the government just to own it. And I believe that this taxation is the reason there will be fewer jobs, and less investment – and then less welfare.”

More On This Topic

Norway wealth fund posts $193b in H1 profit

Norway’s $1.9 trillion wealth fund starts winding down China office as Asia hub shifts to Singapore

Mr Kolstad isn’t alone in voting with his feet. Some 65 rich Norwegians with combined net wealth exceeding 47 billion kroner moved to Switzerland in the space of a year, according to local business paper Dagens Naeringsliv.

They include oil billionaire, Aker ASA Chairman Kjell Inge Rokke, the country’s seventh-wealthiest person, according to Kapital; Kristoffer Reitan, an heir to retail tycoon Odd Reitan, and more recently, Alfie Haaland, the father of soccer superstar Erling Haaland.

Mr Bjorn Daehlie, a multiple Olympic champion in cross-country skiing, and Mr Jorgen Dahl, a home security tycoon, have also emigrated, as has Norway’s richest woman Ninja Tollefsen.

One exception is Mr Gustav Magnar Witzoe, heir to a salmon farming empire and Norway’s richest person in 2021. The 30-year-old cancelled a planned relocation in order not to leave family and friends behind, he told public broadcaster NRK in July.

Switzerland has become the destination of choice because its wealth tax offers a loophole to escape Norway’s regime under a double taxation treaty, which allows exiles to hand over a lump sum to Swiss authorities. 

Norway’s approach is shared across the Nordic region with initiatives to tax the rich after the pandemic, when stocks and property markets boomed while low-paid workers took the brunt of the fallout. None has seen such an exodus though.

Norway’s maximum wealth tax rate, applicable to fortunes in excess of 20 million kroner, was increased to 1.1 per cent by Mr Store’s cabinet from 0.85 per cent during the previous, Conservative-led government. A reduction in rebates means the effective rate almost doubled.

On top of that, the effective tax rate on dividends and capital gains on shares rose to 37.8 per cent last October, up six percentage points from two years ago. 

That followed moves by some business owners to utilise legal loopholes, avoiding levies for years. 

Then last November, the government removed a five-year limit on exit tax on unrealized gains on shares and other assets.

The cabinet is still considering reining in personal consumption through companies’ books but will “adjust” the plan from an initial proposal, State Secretary Erlend Grimstad said in an emailed response to Bloomberg last month. That followed outrage from the business community at the earlier draft.

“The government has become very cautious when it comes to proposing new taxes” after such criticism, according to Dr Guttorm Schjelderup, a professor at the Norwegian School of Economics. “I very much doubt that they will propose personal consumption taxes of any kind.”

The outcome of Monday’s municipal election may reduce the appetite to proceed with the plan. Mr Store has already signalled that large-scale tax changes are off the table.

The Conservatives lead with 25.3 per cent support ahead of his Labor Party at 21 per cent, according to a recent poll by broadcaster TV2. The other ruling partner, the Center, polling at 7.7 per cent, could be the biggest loser.

Mr Kolstad, 52, says he would move back if the Conservatives take power on a national level, though he worries that some of his peers may never return.

“To force business owners to move away from the country – like we say in Norway, it’s like to pee in your trousers,” he said. “It’s getting very bad after some time.” BLOOMBERG

More On This Topic

Credit Suisse accused of aiding more tax evasion during broader tumult

Most wealth taxes are irrational ideas

Join ST’s Telegram channel and get the latest breaking news delivered to you.

p.st_telegram_boilerplate:before {
display: inline-block;
content: ” “;
border-radius: 6px;
height: 6px;
width: 6px;
background-color: #12239a;
margin-left: 0px;
margin-right: 13px;

a.st_boilerplate {
font-family: “SelaneWebSTForty”, Georgia, “Times New Roman”, Times, serif;

- Advertisment -

Most Popular