In a controversial decision, Kjell Inge Røkke, Norway’s top taxpayer and largest shareholder of investment firm Aker ASA, recently announced his relocation from Asker, Norway, to Lugano, Switzerland. Røkke is just one among 50 billionaires and millionaires who have left Norway in the past year due to rising wealth tax rates. This exodus has cost the Norwegian government tens of millions in lost tax revenue and ignited debates on wealth taxation in the UK.
Wealth Tax Hike: Norway’s Rich Residents Fleeing
The Labour-centre coalition in Norway increased wealth tax rates by 0.1 percentage points, leading to record numbers of the country’s wealthiest residents fleeing. More than Nkr 40bn (£3bn) in combined net worth has left the country for Switzerland since 2009, according to Norwegian newspaper Dagens Naeringsliv. The tax raid began last November and is expected to prompt even more wealthy Norwegians to leave.
Norway is one of only four OECD countries still imposing a wealth tax, and it has long been a sore spot for the nation’s wealthiest citizens.
Over the years, most OECD countries have repealed their wealth taxes due to concerns about the rich moving their assets elsewhere. France, the latest to scrap its wealth tax in 2017, lost an estimated 60,000 millionaires between 2000 and 2016, according to research by intelligence firm New World Wealth.
The Limited Impact of Wealth Taxes on Government Revenue
Despite their unpopularity, wealth taxes generate surprisingly little revenue for the government. In Norway, only about 1% of the tax take comes from wealth taxes, according to the OECD. Dan Neidle of Tax Policy Associates, a non-profit, commented, “Norway is probably the developed country with the most significant wealth tax, but it’s still not very significant.”
While Switzerland also imposes a wealth tax, it offers deals for foreigners, making it an attractive destination for wealthy individuals seeking a new home. In certain Swiss cantons, non-working residents can opt for a favorable lump-sum tax based on their expenditures and living standards rather than their worldwide income and assets.
In response to the exodus of high taxpayers, Norway is considering implementing an “exit tax” to tax individuals on saved capital income upon leaving the country.
Last November, the government also repealed “the five-year rule”. That previously allowed wealthy Norwegians to sell their shares without paying tax on the gain if they had lived abroad for more than five years.
Wealth Tax Debates in the UK: A Warning for Labour?
The situation in Norway has sparked concerns in the UK, where the Labour party is considering various forms of wealth taxation.
While Labour leader Sir Keir Starmer has denied plans to introduce a wealth tax, the party is exploring targeting forms of wealth. Those include removing private schools’ charitable status and the “non-dom status” for UK residents living abroad.