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Tuesday, July 16, 2024

Norway tries to rein in tax refugees

Norway’s left-center government is taking new steps to try to keep wealthy taxpayers from moving their fortunes abroad. Stricter rules are aimed at prohibiting Norwegians from transferring stock holdings, for example, to others in lower-tax countries like Switzerland.

Kari Elisabeth Kaski of the Socialist Left Party (SV) has long advocated higher taxes on the wealthiest Norwegians. Now many have moved their fortunes abroad, and Kaski is pushing the government to impose an “exit tax.” PHOTO: Stortinget

“We want to sharpen taxes on the wealthiest, and tighten tax loopholes,” Kari Eliabeth Kaski of the Socialist Left Party (SV) told newspaper Dagsavisen. Kaski played a key role this week in negotiating a new state budget agreement with Norway’s Labour-Center government, that now gives it a majority in Parliament.

“Only the wealthiest can take advantage of the loopholes,” Kaski said, “and then avoid paying (fortune) taxes for the common good.” She thinks that can result in fewer wealthy taxpayers moving their money out of Norway and to lower-tax countries like Switzerland.

There’s been a steady stream of wealthy Norwegians moving to Switzerland since the Labour-led government raised the country’s already controversial fortune tax. It imposes what many view as an onerous tax on personal net worth, year after year, in addition to taxes on income, property, sales of all goods and services and many others.

Even though some tax relief is offered in the new state budget, it hasn’t stopped the flow of tax refugees. Industrialist Kjell Inge Røkke launched the latest exodus last year and was quickly followed by many of Norway’s billionaires. They’ve included former skiing star Bjørn Dæhlie, Pareto founder Svein Støle and real investor Trond Klavenes.

Kjell Inge Røkke’s move to Switzerland last year prompted many other wealthy Norwegians to do the same. Their tax tolerance reached a breaking point under the minority Labour-Center government that assumed power in 2021. PHOTO: NRK screen grab

Many adult heirs to family fortunes have also moved to Switzerland, or stay out of Norway for as long as it takes to not have Norway as their “tax home.” In several cases, their parents have stayed home and keep running the business, but turn over financial fortunes to their offspring abroad. They include a daughter and son of grocery store billionaire Magnus Reitan (himself an heir to the REMA 1000 chain founded by his father), the daughter of the investor and former Røkke partner Bjørn Rune Gjelsten, the daughter of investor Jan Haudemann-Andersen, several heirs of hotel owner Lars Wenaas and, not least, the daughter of real estate tycoon Ivar Tollefsen. He stayed in Norway, while his 37-year-old daughter Ninja is now among the many Norwegians officially residing in Lugano.

Ninja Tollefsen also showed up this year on a new list of Switzerland’s 300 wealthiest residents. The list is compiled annual by magazine Bilanz, and it’s been “invaded” by Norwegians during the past year, according to Oslo newspaper Dagens Næringsliv (DN). It recently urged Norwegian readers to forget Norway’s own publicly available tax lists, or Norwegian magazine Kapital’s annual list of wealthy Norwegians: “Now it’s (Swiss) magazine Bilanz’s list that counts,” wrote DN, for those interested in a ranking of estimated fortunes.

Røkke, for example, ranked seventh on Kapital’s recent list, but the competiton for top spots is clearly tougher in Switzerland. His fortune last year was estimated at NOK 39 billion (around USD 3.9 billion) but now he’s fallen from 49th to 62nd place on Bilanz’s list, despite a bigger fortune of NOK 40.2 billion.

Røkke still ranks highest among the six other Norwegians on Bilanz’s list, ahead of Ninja Tollefsen and her inherited fortune of NOK 34 billion. Next comes Caroline Hagen Kjos (daugher of retailing tycoon and investor Stein Erik Hagen, who has stayed home in Norway) with NOK 22 billion, Støle with NOK 15.8 billion, Sector Alarm founder Jørgen Dahl also with NOK 15.8 billion, investor Christian Sinding with NOK 5.78 billion and Klaveness with NOK 4.56 billion.

DN has estimated that more than 70 wealthy Norwegians have moved themselves and their fortunes to Switzerland, meaning only a tenth of them made Bilanz’s list. It ranks those with fortunes of 125 million Swiss francs or more (NOK 1.5 billion). Oyher wealthy Norwegians such as the heirs now in Switzerland of real estate investor Kim Erla, shipowner Morten Bergesen, salmon producer Lars Måsoval and real estate investors Knut Gustaf Aspelin and Christian Stabell Eriksen were missing from the list.

Those protesting Norway’s fortune tax and sending their fortunes abroad have been both criticized and even ridiculed by both government officials and labour union leaders. They’ve been called rikinger (equivalent to “richies”), welfare profiteers, salmon barons, tax evaders and capitalists in the most negative sense, among other derogatory terms.

Finance Minister Trygve Slagsvold of the Center Party is not a popular man among any Norwegian business owners and investors. PHOTO: Stortinget

Finance Minister Trygve Slagsvold Vedum of the Center Party has joked that “it must be boring to live in Switzerland,” prompting a sarcastic response by investor Jens Rugseth who moved to Lugano. Rugseth agreed it can be boring not to have to worry over whether trains would run on time (they do in Switzerland, but not in Norway), whether his car would be damaged on Norway’s poorly maintained roads, whether Vedum himself would launch another spontaneous tax or whether he’d face long waiting lists for care at a Norwegian hospital.

Prime Minister Jonas Gahr Støre, meanwhile, went so far as to suggest that those taking their fortunes to Switzerland were “breaking their contract” with Norwegian society, which expects citizens to contribute what they can so everyone can get what they need. That infuriated Rugseth and others, many of whom have paid in hundreds of millions of kroner in tax over the years, only to be met with “unpredictable tax policy,” expenses that make it hard to compete against foreign rivals and a lack of respect for investors who take risks and are punished over their rewards.

“I moved because you broke the contract,” Rugseth, owner and board leader of Carbon Invest AS, wrote in an angry commentary directed at Støre in DN last spring. He’s far from alone, with a recent survey conducted by financial advisory firm Formue showing that more than 60 percent of its clients questioned think tax policy changes have created more uncertainty and prompted them to hesitate with new ventures or investments. More than 80 percent had to pull capital out of their businesses or personal savings to pay their fortune tax and tax on dividends. More than 50 percent said Norway’s high taxes were prompting them to re-evaluate generation shifts.

“We’ve seen a change in attitudes, and I think it’s serious,” Formue chief Øystein Bø told DN. Tax attorney Bettina Banoun agrees, after saying she’d had many calls from people considering whether they should move out of Norway. She called the “massive tax emigration” an “acute problem” among many, telling DN already late last year that wealthy Norwegians’ tax tolerance had hit a limit.

As Swiss real estate developers and advisers continue to advertise in Norwegian media, Kaski of the Socialist Left Party remains firm in her demands to tax the wealthy even harder. She warns of another new so-called “exit tax” that the government intends to propose. It would be imposed “on all money crossing the border.” Only then, Kaski said, “will we have filled most of the tax loopholes that still exist.” Berglund



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