Why Norway’s controversial wealth tax isn’t going anywhere for now
Norway’s wealth tax has proved unpopular since its introduction. However, despite the constant pressure to scrap it, it will likely remain in place.
Norway is part of a small club of countries with a wealth tax in place. The tax rate ranges between 1 and 1.1 percent of one’s net wealth above 1.7 million kroner (or double that for married couples).
The tax has seen the super-rich abandon Norway at a record rate, and it has also proved unpopular with more ordinary people in Norway who may have a savings pot in the country or own their property outright.
READ ALSO: What you need to know about wealth tax in Norway
Part of the reason it is unpopular is that one’s total net wealth is taxed. If someone’s savings are invested, they may need to liquidate the investments (where they are then taxed on gains) to pay the tax.
Tax-free savings pots in other countries could also be taxed in Norway if the tax treaty between Norway and the other country isn’t comprehensive enough.
READ MORE: The five worst tax traps for American citizens in Norway
Some believe the tax is unfair as they feel they are being asked for money they may not have readily available.
However, the tax is an important source of income for Norway. Finance Minister Trygve Slagsvold Vedum told the country’s parliament on Wednesday that scrapping the wealth tax would reduce the state’s income by 34.5 billion kroner.
Referencing a separate set of figures, he told the Norwegian newspaper VG that the top 0.1 percent wealthiest individuals accounted for over a third of the tax money raised and that such a policy had, for example, allowed the government to cut the cost of kindergarten in Norway significantly.
For this reason, scrapping the wealth tax is considered out of the question by the current government.
“I am not going to remove the wealth tax. It will shift the tax burden from the richest to most people. We will never take part in that,” Vedum told VG.
Several alternatives to the wealth tax have been mooted.
Recently, the Confederation of Norwegian Enterprise (NHO) has said it would push to make the wealth tax a 2025 election topic.
It has proposed an exemption on what’s referred to as “working capital” to ensure that the rich don’t take their business overseas.
This would cut the wealth tax by 20 billion kroner by making shares and directly owned commercial property and operating assets exempt.
Another alternative proposed would be the introduction of an inheritance tax. Norway abolished its inheritance tax in 2014.
Increased housing tax has also been pointed to as a way for the government to cover the shortfall a scrapped wealth tax would create. This is despite the government rejecting to take up a suggested increase in property tax from a parliamentary committee in 2023.
This is because the government wants high homeownership rates, and homeowner-friendly policy is considered a key cornerstone of the “Norwegian housing model”.
Vedum has said that such tax changes would also mean a heavy tax burden is put on the shoulders of ordinary people in Norway.
“Increased housing taxation will affect ordinary people and the middle class. And inheritance tax is out of the question for us to reintroduce,” he said.
“We have to take in the loss of income from wealth tax by increasing other taxes and fees. We don’t want that because it is unfair that the very richest should not contribute their rightful share to the community,” he added.
He added that removing the tax would be “un-Norwegian”. He pointed to the Norwegian welfare state being built on those with the most taking on the heaviest tax burden.
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Norway is part of a small club of countries with a wealth tax in place. The tax rate ranges between 1 and 1.1 percent of one’s net wealth above 1.7 million kroner (or double that for married couples).
The tax has seen the super-rich abandon Norway at a record rate, and it has also proved unpopular with more ordinary people in Norway who may have a savings pot in the country or own their property outright.
READ ALSO: What you need to know about wealth tax in Norway
Part of the reason it is unpopular is that one’s total net wealth is taxed. If someone’s savings are invested, they may need to liquidate the investments (where they are then taxed on gains) to pay the tax.
Tax-free savings pots in other countries could also be taxed in Norway if the tax treaty between Norway and the other country isn’t comprehensive enough.
READ MORE: The five worst tax traps for American citizens in Norway
Some believe the tax is unfair as they feel they are being asked for money they may not have readily available.
However, the tax is an important source of income for Norway. Finance Minister Trygve Slagsvold Vedum told the country’s parliament on Wednesday that scrapping the wealth tax would reduce the state’s income by 34.5 billion kroner.
Referencing a separate set of figures, he told the Norwegian newspaper VG that the top 0.1 percent wealthiest individuals accounted for over a third of the tax money raised and that such a policy had, for example, allowed the government to cut the cost of kindergarten in Norway significantly.
For this reason, scrapping the wealth tax is considered out of the question by the current government.
“I am not going to remove the wealth tax. It will shift the tax burden from the richest to most people. We will never take part in that,” Vedum told VG.
Several alternatives to the wealth tax have been mooted.
Recently, the Confederation of Norwegian Enterprise (NHO) has said it would push to make the wealth tax a 2025 election topic.
It has proposed an exemption on what’s referred to as “working capital” to ensure that the rich don’t take their business overseas.
This would cut the wealth tax by 20 billion kroner by making shares and directly owned commercial property and operating assets exempt.
Another alternative proposed would be the introduction of an inheritance tax. Norway abolished its inheritance tax in 2014.
Increased housing tax has also been pointed to as a way for the government to cover the shortfall a scrapped wealth tax would create. This is despite the government rejecting to take up a suggested increase in property tax from a parliamentary committee in 2023.
This is because the government wants high homeownership rates, and homeowner-friendly policy is considered a key cornerstone of the “Norwegian housing model”.
Vedum has said that such tax changes would also mean a heavy tax burden is put on the shoulders of ordinary people in Norway.
“Increased housing taxation will affect ordinary people and the middle class. And inheritance tax is out of the question for us to reintroduce,” he said.
“We have to take in the loss of income from wealth tax by increasing other taxes and fees. We don’t want that because it is unfair that the very richest should not contribute their rightful share to the community,” he added.
He added that removing the tax would be “un-Norwegian”. He pointed to the Norwegian welfare state being built on those with the most taking on the heaviest tax burden.
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