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Saturday, July 20, 2024

Sharper ‘exit tax’ draws both praise and complaints

Norway’s left-center government is trying to crack down on wealthy Norwegians who move abroad mostly to avoid the country’s controversial annual tax on net worth. Anyone relocating to Switzerland or other countries with a lower tax burden will now be slapped with a more onerous “exit tax” even on unrealized gains.

Finance Minister Trygve Slagsvold Vedum thinks a tougher “exit tax” will stop wealthy Norwegians from leaving the country. Others aren’t so sure. PHOTO: Finansdepartementet/Kenneth Hætta

Under the new law, which took effect March 20, all tax debt on the value of net assets worth more than NOK 500,000 must be settled within 12 years of departure. If not, the state will start charging interest on the tax debt. If the so-called tax refugee returns to Norway, however, the tax will be excused or, if already paid, refunded.

The tax is directed primarily at latent value of shareholdings even if they’re not sold. “If you leave Norway, you must pay tax on what you’ve earned in Norway,” claims Finance Minister Trygve Slagsvold Vedum of the Center Party. His goal is to stem the flow of wealthy Norwegians leaving the country, and the exit tax on share values will be the same as on dividends: 37.8 percent.

“It’s all about everyone contributing (to Norway’s social welfare state) and not running away from their tax bills, while those with normal jobs and income can’t do that,” said Vedum. He’s trying to remove the “tax motivation” to leave: It’s been estimated that if the government’s new tax had been in place when wealthy industrialist Kjell Inge Røkke was among the first to move from Norway to Switzerland in 2022, it likely would have cost him nearly NOK 13 billion.

While some claim the tax will hurt entrepreneurship and equate it to confiscation, others claim it’s not unreasonable. Business newspaper Dagens Næringsliv (DN) noted, meanwhile, that it’s “perhaps rather optimistic” for Vedum to think there no longer will be a tax motivation to leave the country.

“The combination of high tax on dividends and the fortune tax that doesn’t exist in most other countries will still give business owners and investors reason to evaluate their residential address,” DN editorialized. Several other economists also continue to claim that Norway’s unique, annual tax on net worth (called formueskatt, literally “fortune tax”) is the biggest problem, since it can hinder willingness to invest and prompt “smart heads” to leave the country. Berglund



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