Tax Break

John Fisher, international tax consultant

Archive for the category “Norway”

Brother, can you spare a dime?


Not quite Laurel and Hardy

He is best remembered through the prism of the witticisms of his arch-rival, Winston Churchill: ‘A modest man, who has much to be modest about’; ‘A sheep, in sheep’s clothing’; ‘Up drew an empty taxi, and out stepped…’, but Clement Attlee, the fiftieth anniversary of whose death is being marked this year, had many arrows to his bow. His sound defeat of Churchill in the 1945 election heralded in the Welfare State and wholesale Nationalization (including the Bank of England, coal and steel, and the railways), which changed Britain forever. Even Margaret Thatcher, who staked her claim to a place in history on unravelling much of what Attlee had done (with mixed results – someone recently suggested that Virgin Trains’ motto should be ‘The first time is always the worst’), referred to him as, ‘all substance, and no show’.

Fast-forward seventy years and it seems everyone, apart from the Americans, talks the talk about looking after the weaker elements in society and redistributing income, but doesn’t walk the walk of being willing to pay the price. There is more show than substance.

The latest evidence comes from that country up there in social Valhalla, Norway.

Six weeks ago the conservative government introduced a Voluntary Tax Payment Program. When I first read this, I assumed it was a Voluntary Disclosure Program for naughty Nordics – but no, it is what it says. If, after paying nearly 50% tax, you fancy paying some more, your contribution will be gratefully accepted by the government.

Well, according to the latest available statistics (at least, available to me), the total take has been around $1,500 – which includes tax lawyers and accountants making small contributions to see how it works (and, it has to be assumed, claiming their payments as a business expense). It also turns out that this is not Norway’s first voluntary payment scheme – they set one up in 2006 to which around 90 people have, to date, contributed a total of $85,000 – all, curiously,  anonymous ‘donations’. This might sooth a tax evader’s conscience while financing a government minister’s sleigh expenses, but it won’t do much for the relief of the poor.

When push comes to shove, the vast majority of people pay taxes because they have to, whatever their political hue, and high taxes are a toxic election loser. Only the Americans tell it as it is. The main reason for their dogged refusal to adopt VAT is considered to be the ease with which additional revenue could be raised resulting in ‘inflationary’ pressure on government spending, with the dreaded prospect of turning America into a European-style welfare state.

Modern attitudes are perhaps neatly reflected in a statement by a left-leaning political pundit on the reason for the large turnout of Labour-supporting young voters at the recent British General Election. Referring to the inability of the young to step onto the home-owning ladder due to the exorbitant cost of housing, she said: ‘They didn’t vote conservative, because they have nothing to conserve.’

Back in 1945, despite the Conservative Churchill’s massive personal popularity and acerbic witticisms, there were less egocentric reasons to elect Clement Attlee and his Labour colleagues.

Reindeer in the headlines

What is a Volvo doing in Norway?

What is a Volvo doing in Norway?

Oslo is not the capital of Sweden, and that nice King Harald, who has his photograph taken once a year handing out coveted prizes to clever people, is not the King of Sweden. Harald is King of Norway, which is just as well really as he lives in Oslo which is the capital of Norway (and not Sweden).

If that sounds obvious to you, you may not want to read on – but before you go answer this : “What is the name of the outgoing Prime Minister of Norway who has held the post for the last 8 years?” …GOTCHA! Whoever he is, his name is no longer worth remembering because he was trounced the other day by the incoming Prime Minister (Male or Female?). And, without stopping to think: “Norway is a member of the EU, True or False?”

I am glad you decided to stay. You see, Norway is one of those countries that everybody is vague about, probably because it is stuck up there in the forgotten attic of the world and it is bloody cold.

Mr Stoltenberg preparing recently for his  new career as a taxi driver

Mr Stoltenberg preparing recently for his new career as a taxi driver

What is interesting is that socialist Jens Stoltenberg lost the election despite Norway having the second highest per capita GDP in the world (only beaten by that “Ode To A French National Car Park” – Luxembourg) and unemployment of three point something per cent. It appears that, far from being driven by a desire to move from a welfare state to a more competitive one (Ms Erna Stolberg, the next Prime Minister, is a conservative), Norway’s 5 million citizens were simply bored looking at the same face for 8 years. You might think that they are also bored sitting around sweating in Saunas – but that is in Finland which is not in Norway.

What successive Norwegian governments, and Mr Stoltenberg’s in particular, have done exceedingly well, is solve  the demographic problem Norway shares with most of the western world. In order to finance an increasingly aged population, western countries  need population growth and increased productivity. The world is expected to reach its maximum sustainable population statistic sometime later this century, at which point it will be time to hop on the last VIrgin Galactic flight to Mars.

Norwegian governments, rather than squander all the oil and gas revenues collected from  Statoil, the giant state-controlled company, as well as taxes, licences and royalties from operators, chose to establish a Sovereign Wealth Fund instead. By effectively dampening demand, Norwegian living standards were restricted (Norwegians are, after all, less rich than the Luxembourgians) in the name of a future bonanza.

The Norwegians understood that this guy doesn't do pensions

The Norwegians understood that this guy doesn’t do pensions

Norway does not need a baby boom to ensure its pensioners are looked after – they will benefit from the fruits of their diversified investments around the globe  (by some estimates the SWF owns 1% of traded shares worldwide). Were the western world to do this more systematically  western pensions would be financed by increased productivity in the developing world and, around the time that Virgin Galactic flight is taking to the skies, there would be less frantic worldwide demand accompanied by equilibrium in the world economy. And there would still be plenty of Norwegian Smoked Salmon to go round.

Then, perhaps, King Harald’s descendant would present the Nobel Prize for Economics to Norway – if he could find where it is on the map.

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