It’s Not the Taxes

Norway’s wealthiest are fleeing the country:

A record number of super-rich Norwegians are abandoning Norway for low-tax countries after the centre-left government increased wealth taxes to 1.1%.

More than 30 Norwegian billionaires and multimillionaires left Norway in 2022, according to research by the newspaper Dagens Naeringsliv. This was more than the total number of super-rich people who left the country during the previous 13 years, it added. Even more super-rich individuals are expected to leave this year because of the increase in wealth tax in November, costing the government tens of millions in lost tax receipts.

Many have moved to Switzerland, where taxes are much lower. They include billionaire fisher turned industrial tycoon Kjell Inge Røkke who moved to the Italian-speaking city of Lugano, just over the border from his favoured hangout Lake Como and the fashion capital Milan.

Røkke, 64, is the fourth-richest Norwegian, with an estimated fortune of about NOK 19.6bn (£1.5bn). In an open letter, he said: “I’ve chosen Lugano as my new residence – it is neither the cheapest nor has the lowest taxes – but in return, it is a great place with a central location in Europe … For those close to the company and to me, I am just a click away.”

His relocation will cost Norway about NOK 175m in lost tax revenue a year. Last year, Røkke was the country’s highest taxed individual. Dagens Næringsliv calculated that he has paid about NOK 1.5bn in tax since 2008.

His move to Switzerland follows a relatively small increase in tax aimed at the country’s super-rich, who face wealth taxes at both the local and state level. That includes a municipal tax of 0.7% on assets in excess of NOK 1.7m for individuals, or NOK 3.4m for couples. There is also a state wealth tax rate of 0.3% on assets above NOK 1.7m. In November, the government raised the state rate to 0.4% for assets above NOK 20m for individuals, and NOK 40m couples, taking the maximum wealth tax rate to 1.1%.

Ole Gjems-Onstad, a professor emeritus at the Norwegian Business School, said he estimated that those who had left the country had a combined fortune of at least NOK 600bn.

This is a fascinating article, because for decades, the media has aggressively denied that wealthy people adjust their behavior in response to tax increases. I remember, in particular, a three-part series published by the St. Paul Pioneer Press in the late 1990s that lamented the fact that new corporations were not growing up to replace the great Minnesota companies of the 1950s through 1970s, the Honeywells, the 3Ms, and the Control Datas, but didn’t once mention the fact that Minnesota then had some of the highest income taxes in the country.

The omission was rather remarkable, given the way in which the vast majority of the members of the Minnesota corporate boards at the time were erstwhile Minnesotans who were Florida residents.

But I don’t think that’s what’s happening here. Especially considering that the Norwegians are disproportionately opting to move to Switzerland, where the wealth taxes are even higher. For once, I don’t think these decisions are being driven by tax rates. Instead, I strongly suspect that the wealthy Norwegians are electing to move to a country that is going to remain neutral in the Russian-NATO war, knowing that when the proxy war goes direct, Norway and its oil supplies are almost certainly going to be a target for occupation by NATO and invasion by Russia.