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Thursday, October 6, 2022

Politicians criticize tycoon’s move to Switzerland

One of Norway’s wealthiest men, industrial tycoon Kjell Inge Røkke, cites other reasons for moving to Switzerland than avoiding his homeland’s controversial tax on net worth, but neither politicians nor professors are buying them. One professor called Røkke’s move “a frontal attack on fortune tax (formueskatt)” that other rich Norwegians may mount, too, while political party leaders and Members of Parliament expressed both surprise and disappointment.

Hadia Tajik, who’s served as finance policy spokesperson for the Labour Party, is among politicians defending Norway’s controversial annual tax on net worth. On Monday she was also among those criticizing wealthy industrialist Kjell Inge Røkke’s decision to move from Norway to Switzerland, where he’ll ultimately be able to avoid the tax. PHOTO: Stortinget

“Kjell Inge Røkke has announced that he’s now finished as a contributor to Norwegians’ common interests,” Hadia Tajik of the Labour Party told state broadcaster NRK right after Røkke confirmed that he no longer lived in Norway. “I must admit I’m surprised.” She chided Røkke for leaving a country that has provided him with lots of opportunity, even though he earned his initial fortune in the US and invested it back home in Norway. She thinks tax laws should be tightened to make it more difficult to realize tax-free gains if living abroad.

Røkke’s move is a particular blow to Labour, which the industrialist has supported in the past. Labour nonetheless strongly supports Norway’s special fortune tax that’s assessed annually on Norwegians’ net worth. Its youth group wants to reinstate inheritance tax as well, as a means of taxing the wealthy.

In Røkke’s case the tax on his net worth is estimated to cost him anywhere from NOK 600,000 to NOK 1 million (USD 60,000-100,000) per day. “Everyone involved in economics and finance thinks Røkke moved to Switzerland because of the fortune tax,” Ole Gjems-Onstad, professor emeritus at the Norwegian Business School BI, told NRK. He likened the move to a “frontal attack” on the tax itself “regardless of what he (Røkke) says about the fine climate in Switzerland and its central location.”

Røkke published a letter he’d written to “fellow shareholders and colleagues” on the website of one of his largest companies, Aker, on Monday, that immediately grabbed headlines. “A difficult choice has been made,” he began. “I’ve moved from Asker, Norway to Lugano in Switzerland.”

He quickly added that “my capital will continue working in Norway,” while his family company TRG and all the stocklisted Aker companies “will continue as before, rooted in a Norwegian heritage for developing knowledge-based industries for a global market.”

Kjell Inge Røkke is generally media-shy and works hard to control information about himself. This photo is from 2009, when he mocked the state for objecting to one of his business deals. PHOTO: NewsinEnglish.no/Morten Møst

He went on to note how he’d left Norway and emigrated to the US “as a 21-year-old in 1980 with no education or money.” He ended up making a fortune in the fishing industry out of Seattle before returning to Norway 21 years later, at the age of 42, and investing his money in a variety of ventures. They included the venerable industrial concern Aker, which now, he noted, employs around 18,000 people in Norway and nearly as many outside the country and ranks as Norway’s “largest private industrial employer.” The Aker companies include oil and gas firm Aker BP, engineering and energy firm Aker Solutions, renewable energy firm Aker Horizons, the Cognite and Aize companies operating within industrial software, Aker BioMarine, which he describes as a “wild card within marine biotech with great potential,” and SalMar Aker Ocean in the fish-farming business. He also recently hired the former head of Norway’s Oil Fund, Yngve Slyngstad, “to build Aker Asset Management into an active management company closely linking capital with industry knowledge and transaction expertise.”

Now, another 21 years after returning to Norway and at the age of 63, he claims it’s time for a new chapter in his own life. He wrote that it would be “natural” for him to “consider stepping down from the boards of several of the portfolio companies,” enabling him to “spend more of my time and resources on philanthropic activities.”

‘Moral compass’ of his own
Newspaper Dagens Næringsliv (DN) has estimated that Røkke already has paid around NOK 1.5 billion in taxes to Norway just since 2008. He hasn’t reported or paid tax on much income over the years, but his personal fortune tax bills have been formidable, amounting to NOK 175 million last year alone. That, DN noted, made him Norway’s biggest taxpayer.

In a recent interview with DN Røkke suggested that the left side of Norwegian politics “thinks they own the moral compass, but it can happen that some of those who’ve earned capital also have a moral and community-oriented compass.” He’s already announced that he intends to give away half his fortune which amounted to around NOK 19.6 billion in 2020, but he wants to do it on his terms and based on his family’s values. “Internet trolls and populistic politicians … won’t influence our choices,” Røkke told DN. He and his family, for example, currently fund scholarships for master’s- and doctoral degrees at leading universities including Harvard, MIT, Stanford, the California Institute of Technology, the University of Pennsylvania, Oxford, Cambridge, Imperial College and the National University of Singapore.

Røkke wrote that he settled on Lugano “as my new residence,” a location he described as “neither the cheapest nor with the lowest taxes,” but in return “a great place with a central location in Europe.” He wrote that he’d given his sprawling home in Asker called Konglungen (which attracted lots of headlines when it was built for its lavishness) “as a gift to my ex-wife Anne Grete, who will live there with the two children we share.”

Tax rules may be tightened
Financiers, the professors and lawyers immediately picked up on how the Norwegian government (now headed by the Labour Party) not only backs the country’s fortune tax but may soon make it more difficult to avoid by moving abroad. Expatriate Norwegians can currently end their tax obligations to Norway after five years years abroad but a government commission is considering extending that. “It can be profitable to move out now,” Guttom Schjelderup, a professor specializing in tax at business school NHH, told NRK. He noted that work is underway on changes in the tax law that can make it less profitable to move personal fortunes abroad: “Many with large fortunes are aware that the five-year rule can be tightened, making it more difficult to move away with their fortunes. For those evaluating a move, it’s now or never.”

Bjørnar Moxnes, leader of the Reds Party, thinks the wealthy should pay the most tax. Røkke wants to give away half his fortune based on his own “moral compass.”
PHOTO: Rødt/Ihne Pedersen

At least one top tax lawyer in Norway confirmed that requests for help in moving fortunes abroad have increased this year. That upsets many Norwegian politicians, especially those on the left like Tajik of Labour. Torgeir Knag Fylkesnes of the Socialist Left Party (SV) is among them, with a proposal to double the five-year rule to 10. He thinks it’s urgent to impose new laws that would hinder tax refugees.

Bjørnar Moxnes, leader of the Reds Party, said he’s also disappointed that Røkke has moved abroad and won’t pay tax to Norway any longer. He won’t lower taxes, though, nor eliminate the fortune tax. “The Reds think the wealthiest should contribute more to society, and it’s important that Norway doesn’t let itself by held hostage by billionaires who threaten capital flight,” Moxnes said. “If we lower taxes to hinder folks like Røkke from moving, it will set off a race towards the bottom of tax policy.”

‘A sad pattern here’
Une Bastholm of the Greens Party sees “a sad pattern here” in which “super-rich Norwegians have moved to Switzerland, or place their businesses and their money in tax paradises.”

Others were more charitable, noting that Røkke has undoubtedly created thousands of jobs after returning to Norway. The mayor of Asker where Røkke has lived said she wished he would remain in her community, to which he’s contributed mightily over the years, but there’s little that could have convinced him to stay. “Tax revenues from our residents are an important part of the income foundation for the community, and secure services,” said Lene Conradi of the Conservative Party. She thanked Røkke for all the years he chose to live in Asker, and for his tax contributions. “I wish Kjell Inge the best, and am sure that he will still contribute to value creation and jobs in Norway.”

Both the Conservatives, the Progress Party and the Liberals have supported lowering fortune taxes. “If we have tax pressure that’s too high, it will mean that resourceful people on which we rely will disappear out of the country,” said Sivert Bjørnstad of the Progress Party.

Only Olaug Bollestad of the Christian Democrats seemed to believe Røkke stated reasons for his move, adding that  “the nature in Switzerland isn’t so unlike northern Vestlandet where Røkke grew up (in Molde), so I hope he feels at home there.” She added, though, that “it’s sad for Labour and the government that they’re losing an important supporter and taxpayer.”

NewsinEnglish.no/Nina Berglund

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