Over half its economy is based on oil and mining. It has failed to develop meaningful economic diversification, and, because it has wisely banked so much of the proceeds of its oil (over US$300k per capita), there's not a lot of pressure to adapt.
Norway will not be a center of innovation anytime soon, except in oil-related fields. Eventually, as oil gets replaced as a source of energy, they may feel more pressure to change. But for now, they suffer from a more sophisticated version of the resource curse.
Sweden is an interesting counterexample, which has a lower GDP per capita but a much more diversified economy. Sweden abolished a wealth tax they used to have almost 20 years ago.
Because such a large portion of the oil proceeds are banked, it also distorts the rest of the economy far less than it otherwise would. Unless you live in very specific parts of Norway, you can go your entire life with hardly any exposure to the oil industry directly, or secondary interactions with major suppliers to the oil industry.
I recognize your point but am wary of it being supported with direct job creation numbers, as that doesn’t reflect the scale of secondary industries (ie. indirect jobs created by oil & mining may be a larger number than direct jobs created) and also, job numbers don’t reflect the scale of the companies creating the jobs.
EDIT: stackoverflow question:
https://skeptics.stackexchange.com/questions/15235/did-swedi...
The rest of europe absolutely cannot (but that won't stop them, just like with rent control).
Suppose the same principle was applied to a home owner. At the end of each year your property is evaluated and you're taxed on the difference between last and this years price. You own an asset and this asset is valued by the rating agency as more expensive than before. Now you have a liability that you need to pay and if you don't you'll be in big trouble, because you owe the money to the government.
So independently of your own actions & impossible to predict you will need to plan for this expense. How many homeowners and rentiers would like that?
The "realization principle" in tax law specifies that income is not subject to tax until it is "realized" through a taxable event, such as the sale or exchange of an asset. In the US this was established in early 20th-century U.S. Supreme Court cases such as Eisner v. Macomber (1920). In this case it was established that mere appreciation in value does not constitute taxable income until a sale or exchange occurs.
Europe is not very business friendly. This regulation will make creating businesses even harder. When governments need more revenue they need to create more opportunities to create that revenue, not squeeze the current business tighter and tighter. Startups are risky, adding additional risk would just kill more of them sooner.
BTW, it's easy to fix "loan against my equity" evasion by classifying the "money has been loaned" as a "realization" event.
It made more sense in the past, when speculative valuations were less common and capital flight was less of an issue. It was collected from wealthy people, who could probably afford to pay. And it served as an additional incentive to invest your wealth productively. But then globalization arrived and made the drawbacks bigger than the benefits.
Isn't this exactly how property taxes usually work? (In the absence of caps like California Prop 13, that is.)
The realization principle is a hallmark of income tax law, but many taxes are not income taxes.
This is exactly how state property tax is assessed in the US. You're not taxed on just the difference but the entire assessed value of the house. There have been cases of seniors who have bought and lived in their homes for 30, 40 years having to sell because they could not afford the tax after the value of their home went into the stratosphere. Similarly for poorer neighborhoods experiencing gentrification when property value shot up beyond what the original buyer paid, and they are forced out. When objections are raised on how a wealth tax would be infeasible to administer, my rejoinder is local governments levy it all the time, on the middle class, they just call it a property tax.
Norway does apply the wealth tax to home owners. Though there is a discount factor for different types of assets, and the value of your primary home is discounted by 75%. There's also a minimum threshold.
If people there are OK with these taxes and don't vote them out it's their choice. My point is that it's a bad and wrong solution with bad consequences.
There is data about this: https://www.gemconsortium.org/data
And also check how many big companies have been started in the last 10 years in EU.
Yes, it can be a challenge for fast-growing startups where the secondary market is not very liquid, and is something people need to be aware of. It's not generally a major problem, in that if you can't find ways of structuring deals in ways that allow for ensuring the founders can afford the tax bill, the company just isn't doing very well.
[1] https://www.nho.no/tema/privat-eierskap/ny-menon-rapport-kra...
Why wouldn't you just take a loan against the assets? A few percent of interest is a lot cheaper than 38%. In Canada you used to have to pay taxes on unrealized option gains, standard procedure was to take a loan to pay taxes. If the options gains disappeared, you'd use your next years tax refund to pay back the loan.
Not sure why that is comparable.
The other alternative is to borrow 1m, and pay interest on a 1m loan.
Unless you hold the loan long enough for the aggregate interest accrued until you're able to sell some shares exceeds the dividend tax, it's a net saving.
Looking at the US, rasing taxes on the rich and doing more against unrealized gains won't happen for at least four years, so we don't have to worry about that, at least.
This is a problem if you have no clue about the tax system and don't seek advice before your company has already reached a huge size.
I was 19 when I set up my first company in Norway, and had no prior exposure to business - I still knew the wealth tax was a thing to be aware of.
But government services cost money, and by other accounts [0] Norway are doing pretty well:
Norway performs well in many dimensions of well-being relative to other countries in the Better Life Index. Norway outperforms the average in jobs, work-life balance, education, health, environmental quality, social connections, civic engagement, safety and life satisfaction.
(I don't pretend to know the answer, and ask because I don't see how to figure that out)
They’re ‘unrealized gains’ for a reason.
That said, I also feel there is a way to do this tax properly.
The bridge that governments are attempting to make is between "you can't tax me on these, they're unrealized gains!" and "I'm going to fund my billionaire lifestyle by borrowing against these unrealized gains."
Maybe tax people on those unrealized gains if they use them as collateral?
Rent prices are extremely high and apartments are quite small compared to other European cities.
Alcohol is so expensive, that Norwegians go on alcohol shopping tours to Sweden.
Trains in Oslo don’t run 24 hours, so you have to take long detours with busses at night or pay obnoxiously high rates when taking a cab.
No, Norway is definitely not the paradise you’re trying to make it.
Also, these people that left Norway weren’t against paying taxes. They were against the socialist government trying to rip them off with a completely unfair taxation.
Of course data is not perfect, and there are often issues with methodology, data quality, or analysis the data. Even so, I usually find data more persuasive than anecdotes.
Rent is high in large parts because average incomes are high. This is one of the effects of a relatively flat income structure. As someone earning far above average, I'm better off in the UK, while someone on a job below the top ~10% or so would probably have a higher standard of living in Norway.
Not having things run 24/7 is annoying, but a factor of being a country with one of the lowest population densities in the world.
> They were against the socialist government trying to rip them off with a completely unfair taxation.
Nobody forced them to start their businesses. The wealth tax is not new, and has remained in place through both left- and right-wing governments, thought with some swings back and forth in rates.
This gotta be the most extreme instance of NFT brain I've ever encountered...
They see "taxing the rich" first and foremost as punishing an ideological enemy, with little thought given to actually maximizing the tax revenue they can collect from them over time.
Socialist mostly want a floor so people don't starve to death or lose their roof to medical bills. That floor would be quite easily to establish at a comfortable life for 10 billion people on this planet while still allowing for more than enough many times over millionaires.
you pay tax on unrealised gains the same way the rest of us do when facing an unexpected bill that we can't afford - you sell your stuff.
However, to me this mostly looks like a practical issue, and the traditional dogma that a broader tax base is a better one likely holds here too. Taxes should be on all three categories, and for both legal and real persons - and thus each specific category lower (and in particular thereby reducing the height of specific niche corners cases such as this one, and also reducing the opportunity to game the system).
Also, it's interesting to listen to anecdotes like this, but caveat lector; the article's author's experience may not be the norm; and the issues they experienced may be due to the specifics of norway's taxation system or their personal choices, not the principles behind it; and last but not least as long as money can flow mostly freely between tax systems it's not enough for a system to be fair and well designed in a vacuum; it also need to consider how shifting wealth/income/profits across borders will affect outcomes.
To my mind, this is all pretty orthogonal to justice. Clearly, you see that differently. Why does this smack of injustice to you?
So that you know, the practice in question is to open a line of credit on the value of your stock. This enables you to put large amounts of money in your pocket without "realising" your gains. It's a blatant tax dodge. "going into debt" lol no. Close the loophole.
"unrealised gains". gains, not losses.
The "easy fix" isn't working for some reason. Perhaps a one-time tax is still preferable to an ongoing one.
Else, you won't have the concept of unjust laws.
I agree that there will be an ideologically divide, but I don’t think it’s related to entrepreneurship as much as it is to greed. Especially because those crypto “billionaires” were moving to Switzerland anyway. Personally I can see why you would think it was anti-business because it is. You have to keep in mind that not everyone thinks “businesses” which can’t make money, and likely never will, are always a benefit to society.
