Norway Wealth Tax U-Turn Would Threaten Growth, Finance Minister Says
(Bloomberg) -- Norway’s finance minister warned that a change in government in the upcoming elections would lead to a higher wealth tax, trigger capital flight and threaten job creation in the richest Nordic nation.
The September elections could reverse the incumbent Conservative-led coalition’s efforts to reduce wealth taxes, Jan Tore Sanner said in an interview. This would hamper investments to create new income streams that could make up for declining oil revenue, he said.
The Nordic nation is one of five members of the Organization for Economic Cooperation and Development that still taxed individuals’ net wealth as of 2019, the latest available data, down from a peak of 12 in 1996. The opposition Labor Party, well-placed in polls to end the eight-year term of Premier Erna Solberg, has vowed to raise the wealth tax.
“There are probably only a few things the red-green parties agree on, and it is more state control and higher taxes on Norwegian ownership,” Sanner said. “In the years to come, we must make better arrangements for value creation and job creation in Norway. As oil revenues will contribute less, it becomes all the more important to facilitate strong and diverse Norwegian ownership.”
Sanner reiterated Norway must reduce its spending of oil riches, something that has increased in past years, and particularly during the pandemic.
The oil-rich nation has weathered the crisis better than most wealthy peers by relying more than ever on its $1.4 trillion sovereign wealth fund, the world’s largest. At the same time, a government-appointed committee said earlier this year that the nation needs to raise tax revenue or reduce welfare spending as the fallout from the pandemic threatens the sustainability of public finances.
Norwegian business investment will probably be little changed this year following a 6% plunge in 2020, with next year’s expansion forecast at 2.1%, Statistics Norway said in its new outlook on Friday. In March, it had expected a contraction of 2.2% this year and an expansion of 2.8% in 2022. It also said unemployment won’t be back “to what we consider a more normal level” until 2023.
The wealth tax “seems to have had a major impact on the decision to move out among those who have already moved abroad,” according to a survey of the 400 wealthiest Norwegians by local consulting firm NHHS, published last month. There seems to be a “significantly greater risk of relocation if the wealth tax is increased,” it said.
Norwegian shipping billionaire John Fredriksen, 77, acquired Cypriot citizenship in 2006 after it became “increasingly difficult” to avoid paying Norway’s wealth taxes, the Verdens Gang newspaper reported that year. Stakes in companies including Frontline Ltd. and SFL Corp. give him a fortune of $10.2 billion, according to the Bloomberg Billionaires Index.
The Labor Party has pledged to increase the tax rate to 1.1% on wealth exceeding 1.7 million kroner ($203,000), compared with 0.85% now on a threshold of 1.5 million kroner. The top rate would be set at 1.3% on wealth exceeding 20 million kroner.
“It’s clear that tax on Norwegian ownership will be an issue in the election campaign,” Sanner said. “Now we are on our way out of the crisis. It’s important to make it easier for more people to invest their own money in Norwegian workplaces.”
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