Wealthy Norwegians flee to Switzerland to escape wealth tax

More than 30 of the richest Norwegians have fled to Switzerland and elsewhere in the past 12 months, as the country’s business leaders express concerns about wealth taxes set up by the centre-left government ruling in Oslo.

Norway’s public population records show that at least 30 billionaires and millionaires left the prosperous Scandinavian nation for the Alpine jurisdiction in 2022, where taxes are lower in 2022.

Among them is tycoon Kjell Inge Røkke, whose businesses range from fishing to oil, and who was once considered the richest person in the country. Others have moved to countries such as Cyprus, Italy and Canada.

Røkke, who moved to Lugano in September and paid NOK 181 million (R$98 million) in taxes in 2021, declined to comment.

An even larger number of super-rich Norwegians are likely to follow suit because they are worried about tax changes, which they say will hurt the country’s competitiveness.

The most recent name on this list is Fredrik Haga, one of the founders of the Dune group, which provides data services for cryptocurrency operations.

“I had to choose: do I stay in Norway or do I want my business to succeed? It’s not about not wanting to pay taxes. It’s about having to pay taxes on money I don’t have,” he told the Financial Times.

The central point of the debate is the wealth tax adopted by Norway, and applied to all net worth over NOK 1.7 million (US$ 168,000, or R$ 923,000), with a rate of 1.1% for the richest.

Switzerland also has a wealth tax, but offers favorable conditions for foreigners.

For entrepreneurs like Haga, whose equity is mostly tied to his company, the tax structure can force them to extract high dividends or even sell part of the business. However, as Dune remains in the red despite rapid growth, he has no way of extracting dividends from the company and is unwilling to sell a stake.

“Either I take money out of the company or I have to move,” said Haga, who fears his taxes due next year will be higher than his disposable income.

The group of wealthy Norwegians who left for Switzerland in 2022 have a combined net worth of NOK 29 billion ($15 billion) and paid NOK 550 million ($299 million) in taxes, according to tax records from the country.

The 2022 exodus is bigger than the previous 13 years combined, calculated the newspaper Dagens Naeringsliv.

Norway’s wealth tax, one of the few still levied in Europe after France abolished its wealth tax in favor of a property tax in 2018, has long drawn complaints from the country’s wealthy.

“The tax distorts Norwegian business in every way,” said Mathilde Fasting, a tax expert at research institute Civita. “It forces owners to ask their companies for dividends, sometimes greater than earnings. And it substantially intensifies the willingness not to invest in businesses.”

The wealth tax is also a dividing line between left and right in Norway. The second would like to see it abolished, but Prime Minister Jonas Gahr Støre’s center-left government has raised the tax rate on wealth and dividends this year, as well as reducing authorized deductions on corporate assets, for the most vulnerable Norwegians. rich.

Fasting said business wealth taxes were likely to double in 2022 from a year earlier, while the dividend tax increased by nearly 50%. A tax on wealth flight, intended to crack down on millionaires fleeing the country, is expected to be adopted soon.

While Norway “was never considered a country with high political risk,” businessmen now reckon that “we still have a few years left with this government and things could get even worse,” Fasting said.

Social welfare system benefits the richest, who therefore need to contribute more, says government

The government does not seem remorseful. Erlend Trygve Grimstad, secretary of state at the finance ministry, said management wanted individuals and businesses to prosper, but that the wealthiest had to pay more to help maintain the country’s generous welfare system. He also says that Norway has thousands of millionaires, an average higher than that of many rich countries, on a per capita basis.

“People benefit from free education, national infrastructure, free health care, subsidized preschool child care, robust licensing rules, and corporate taxes in line with those of other countries. This means that those who enjoy success under this social model should contribute more than others,” he said.

And not all wealthy Norwegians are leaving. Nicolai Tangen, a former hedge fund manager who now runs Norway’s national investment fund, had to pay NOK 60 million more in taxes than he received in wages when he returned from London. “I gladly pay my taxes. Personally I think I get a lot in return for my tax dollars,” he said.

Karl Johan Lier, chief executive of AutoStore, a robotic storage company, and Norway’s ninth-largest contributor last year, said he understood why people were leaving, especially those who are just starting out in business.

“There are a lot of people who shouldn’t have to leave,” he said, adding that he doesn’t fall into that category. “I have my family here, my grandchildren. This is more important than taxes in this context”, she emphasized.

Haga said he didn’t have much to gain by speaking out on the issue, but that he wanted to sound the alarm about entrepreneurs and Norway’s fledgling startup market.

“Norway has gone from a bad place to a horrible place to build a company. The reason for that is the wealth tax,” he said.

Translation by Paulo Migliacci.