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Monday, February 26, 2024

Shipowner scorned for avoiding taxes

Just days after the Viking Sky cruiseship ran into serious trouble in a storm off the Norwegian coast over the weekend, a new storm is blowing around the cruiseline’s billionaire founder Torstein Hagen. Critics point to how he’s avoided paying taxes to his native Norway for years, only to benefit greatly from the massive, taxpayer-financed rescue operation mounted to help save his passengers’ lives.

Shipowner Torstein Hagen has been subjected to scorn in his native Norway, in the aftermath of the dramatic rescue operation for one of the ships in his Viking Ocean Cruises’ fleet. PHOTO: Viking Ocean Cruises

Hagen publicly thanked his homeland’s rescue operation that also won widespread praise from his grateful passengers. After flying into Molde on a private jet, Hagen also told local newspaper Romsdals Budstikke that the local contribution during and after the dramatic evacuation of passengers on board Viking Sky had been “fantastic” and that “we shall be proud to be Norwegians.”

Several top politicians and media commentators now claim Hagen should show his gratitude and pride by moving home from Switzerland, where he’s legally managed to mostly avoid paying taxes to Norway.  Business magazine Kapital ranked Hagen as Norway’s second-wealthiest person last year with a fortune estimated at NOK 52 billion (USD 6 billion).

Hagen has been branded as a “tax refugee” not only because he lives in a country that’s long been known as a tax haven. Hagen also moved internally within Switzerland, from Basel to Lucerne, when Basel tightened its tax rules for expatriates. Hagen remains a Norwegian citizen but has so far avoided paying either income tax or Norway’s tax on net worth known as formueskatt.

According to tax records, Torstein Hagen did pay NOK 59,784 (USD 7,000) in taxes to Norway last year, but that’s a fraction of what was paid by those who helped save his passengers’ lives on Saturday. That’s when the luxury vessel in Hagen’s Viking Ocean Cruises suffered total engine failure and nearly grounded while making an also-disputed crossing over stormy seas known for being especially treacherous. There were 1,373 people on board, including 915 passengers and 458 crew members.

‘Insult’ and ‘robbery’
“The fact that the country’s next-wealthiest man pays so little tax is an insult and robbery of our society,” claimed Kari Elisabeth Kaski, a Member of Parliament who sits on its finance committee for the Socialist Left party (SV). “We should send Hagen a bill for the rescue operation … even though I realize that can’t be done.”

Kaski and many other Norwegians were also proud of the emergency response to the drama surrounding the cruiseship. Most other vessels in the area, including Norway’s own Hurtigruten line that’s plied the Norwegian coast for more than a century, had opted to stay in port to avoid crossing the treacherous stretch of sea known as Hustadvika. The Finnish captain of the Viking Sky, in agreement with two Norwegian port pilots on board, nonetheless decided to keep sailing from Tromsø to Stavanger. The ship was due back in London on Tuesday. Hagen has denied that economic motives were involved.

One of the pilots, Inge Lockert, defended the sailing decision to website Vesterålen Online, claiming such a large ship as Viking Sky with experienced crew on board should have been able to tackle the storm. Problems only arose when the vessel’s engines failed, Lockert said, leading to a blackout on board and leaving the vessel dangerously adrift until the crew managed to drop anchor. The entire incident is now under investigation.

Hagen mum on tax status
Maria Sneve Martinussen, deputy leader of the Reds party, wrote on social media Sunday that it was good to hear that Hagen was grateful for all the efforts of the rescue crews, volunteers and public authorities who responded quickly to the maritime emergency. “Perhaps he will now understand, as Norway’s next-richest man, why it’s important to pay tax?” she wrote.

That remains unclear, since Hagen has refused to answer questions about his tax status and why he apparently feels no obligation to boost his tax contribution to Norway. Repeated attempts by various Norwegian media outlets to obtain comment from Hagen have been fended off by a public relations man hired in as Hagen’s spokesman. Hagen himself flew back to Switzerland.

He did win some defense during a debate on national radio this week. A politician from the conservative Progress Party noted that the cruiselines pay port taxes and harbour fees, and Norway’s fortune tax has prompted many wealthy Norwegians to move abroad. Kaski retorted that the debate over Hagen “is an important reminder that it’s not just Google and Facebook that manage to avoid paying tax in Norway.” She thinks wealthy Norwegian citizens should take on more of the tax burden, especially in cases where they can still reap the benefits of Norway’s publicly funded safety nets.

Corruption charges dropped
The 76-year-old Hagen, who recently went through a bitter divorce from his wife of 40 years, is originally from the small town of Nittedal just north of Oslo. According to Viking Ocean Cruises’ own website, he obtained a degree in physics from the Norwegian Institute of Technology (now known as NTNU in Trondheim) and an MBA from Harvard. He was a partner at the international consulting firm McKinsey & Co before getting into the shipping business that involved a hostile attempt to take over the Dutch liner company Nedlloyd. He was CEO of the former Royal Viking Line and on the boards of Holland America Line and Kloster Cruise before starting Viking River Cruises and, just a few years ago, Viking Ocean Cruises.

The christening of his new ocean-going line’s first ship, Viking Star, left him facing corruption charges along with the mayor of Bergen and Bergen’s harbour master. Prosecutors suspected that Hagen’s spending on private jet travel, luxury hotels and ceremonies tied to the ship’s launch and christening amounted to bribery of the now-former Bergen mayor, Trude Drevland, whom he’d chosen as godmother of the Viking Star. Hagen was lobbying at the time to change state rules that would allow him to register the ship in Norway’s international registry that allows foreign crew at relatively low pay, and Drevland supported his cause in talks with her Conservative Party colleague who was Norway’s Trade Minister, Monica Mæland. The rules were ultimately changed but corruption charges were ultimately dropped.

Hagen has profited on both his most recent cruise ventures. Newspaper Dagens Næringsliv (DN) said he now faces unexpected costs tied to the drama at sea over the weekend: compensation for passengers, needed repairs to the Viking Sky and forced cancellation of its scheduled cruises. It was due to sail again from London this week but instead the battered vessel was under escort on Wednesday from Molde to Kristiansund for repairs at a shipyard there. The vessel was insured through the P&I (protection and indemnity) association Steamship Mutual but its terms of coverage were not disclosed. DN reported that loss of income alone on the cruise cancellations can amount to NOK 150 million. Berglund



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