Evidence that wealth tax doesn't work

Fred Cryton · 10-04-2023 8:37pm #1

More wealthy people left Norway last year than in the previous 13 years combined due to imposition of wealth tax.

Rather than raising revenue, it is costing the Norwegian state tens of millions in lost tax receipts.

Can this end the argument for once and for all about the merits of a wealth tax?

Just imagine the damage SF will do when they impose it on this country where we are even more dependent on international capital than the Norwegians.. They and other left parties fail to realise that people and capital are internationally mobile.

https://www.theguardian.com/world/2023/apr/10/super-rich-abandoning-norway-at-record-rate-as-wealth-tax-rises-slightly

Strumms · 10-04-2023 8:51pm

PWC only yesterday warned clients to sell assets before SF gets the opportunity to get power… it highlighted the ‘huge threat’ that their tax policies posed for our economy.

Yurt2 · 10-04-2023 9:00pm

https://www.boards.ie/discussion/comment/120462809#Comment_120462809

Great. People dumping their assets should bring down asset price inflation, which has been out of control for the last decade in any case. Particularly real property.

30 people left Norway, stop the presses. I'm sure the salmon farming magnate will continue his salmon farming endevour from Zurich anyway. It's not like the fish are going to migrate to the Alps. I'm sure Norway will survive.

LongfordMB · 10-04-2023 9:01pm

Its incredible that this does not seem to be getting through to voters. It might feel good to "hurt the rich" but it does nothing except hurt the country and ultimately everyone.

LongfordMB · 10-04-2023 9:03pm

People dumping their property means prices are depressed and economic sentiment is lowered which means fewer homes get built ultimately., kerping rents very high. Careful what you wish for.

Yurt2 · 10-04-2023 9:09pm

https://www.boards.ie/discussion/comment/120462845#Comment_120462845

For every high-profile wealthy person that throws a strop and leaves and writes an open letter, there's probably ten more that suck-up the tax and don't go anywhere.

Bizzarely enough, the country these Norwegians are moving to - Switzerland - also imposes a wealth tax. Go figure. Yet it remains a desination for the wealthy.

LongfordMB · 10-04-2023 9:21pm

https://www.boards.ie/discussion/comment/120462875#Comment_120462875

What about losing tens of millions of tax revenue? That's real money going to another country now. So enlighten us what is the point of the tax if less money raised?

Geuze · 10-04-2023 9:30pm

Strong evidence that wealth taxes may not work is the fact that very few countries have wealth taxes.

Here is an OECD report on wealth taxes:

https://www.oecd.org/publications/the-role-and-design-of-net-wealth-taxes-in-the-oecd-9789264290303-en.htm

Foreword

This report examines and assesses the current and historical use of net wealth taxes, defined as recurrent taxes on individual net assets, in OECD countries. It provides background on the use of wealth taxes over time in OECD countries as well as on trends in income and wealth inequality. It then assesses the case for and against the use of a net wealth tax to raise revenues and reduce inequality, based on efficiency, equity and tax administration considerations. The effects of personal capital income taxes and taxes on wealth transfers are also discussed to understand how these taxes interact with net wealth taxes. Finally, the report looks at practical tax design issues and shows that the way a net wealth tax is designed can have a significant impact on the effectiveness and fairness of the tax. The report concludes with a number of practical tax policy recommendations regarding net wealth taxes.

This report complements recent OECD work on the taxation of household savings and, more broadly, on tax design for inclusive growth. The report also paves the way for future work focusing, among other areas, on the design of inheritance and capital gains taxes, as well as on the potential use of wealth-testing for broader tax and benefit purposes.

https://www.oecd-ilibrary.org/sites/9789264290303-en/index.html?itemId=/content/publication/9789264290303-en

Geuze · 10-04-2023 9:31pm

OECD press release:

https://www.oecd.org/tax/tax-policy/better-design-of-taxes-on-personal-savings-and-wealth-is-needed-to-support-inclusive-growth.htm

The Role and Design of Net Wealth Taxes examines the use of net wealth taxes – both currently and historically – across the OECD. It assesses the case for and against the use of net wealth taxes to raise revenue and reduce inequality, but does not call for their introduction. The report suggests that there is little need for net wealth taxes in countries with broad-based personal capital income taxes, including capital gains taxes, and well-designed inheritance and gift taxes. It finds there may be scope for such taxes in countries where the taxation of capital income is low or where inheritance taxes are not levied.

Jim2007 · 10-04-2023 9:34pm

https://www.boards.ie/discussion/2058291844/evidence-that-wealth-tax-doesnt-work

Wealth tax and SF policies are not going to make the slightest difference to the advice we provide clients when investing in Ireland. And the Norwegians I know that moved here over the past 18 months did not move because of the wealth taxes, they moved because all in, no questions asked lump sum tax payments were agreed with the communities they moved to, plus of course the usual donations and support to community interests.

You need to find another excuse or get of the soap box, because neither you or the reporter knows how these deals are done.

Geuze · 10-04-2023 9:35pm

The OECD's 2018 study of wealth taxes shows that the number of states which levied such taxes fell from 12 to just four/five between 1990 and 2017.

Fred Cryton · 10-04-2023 9:40pm

https://www.boards.ie/discussion/comment/120462970#Comment_120462970

So the huge exodus of wealthy people and the loss of tax revenue is just co-incidental with the imposition of the wealth tax? Really? Just happened on the same year by chance?

Fred Cryton · 10-04-2023 9:44pm

In a similar vein there's also the SF policy of 3% extra income tax over €140k. This will push the marginal tax rate at that level to 55%. Higher than Scandanavia except with a rubbish public sector.

This will also cause a flight of high earners. So we will have the asset rich and the higher income earners fleeing the country.

Yurt2 · 10-04-2023 9:58pm

https://www.boards.ie/discussion/comment/120462926#Comment_120462926

I'd let the Norwegian experience shake-out before passing judgement.

There's a school of thought (backed by OECD research) that the risk of "capital flight" or "fiscal expatriation" is only a major risk if the people leaving don't maintain their activities in their country of origin. For instance, wealthy Norwegians tend to be in shipping / shipbuilding / oil and gas support services / fishing. None of those activities can or will be moved to Switzerland if people elect to leave, and that there may well be a significant "reinvesting" effect on their primary wealth generating activities in their country of origin, which in turn may make up for any notional loss of tax via another means.

And that's for those that elect to leave. For those that stay, well they're caught in the wealth tax net. And we don't read about those because they make less noise than those offended by such a tax and leave in a huff.

France had a wealth tax for many years. Yes ultra-wealthy left, but many returned within a few years because frankly they got sick of living abroad. The ultra-wealthy are the most mobile anyway - anything from schooling for their kids, the investment climate in their new host country, to weather can send them back and forth between countries like a yo-yo.

And as noted, not all wealth taxes are created equal. Switzerland has had a wealth tax for donkeys of years, and set at a rate not much lower than Norway's. There may be characteristics of the Norwegian tax that spooked these 30 people, but they may find the grass in the Alps isn't all that greener.

If the Swiss have a long-standing wealth tax, what are all the stinking rich doing hanging out there?

10-04-2023 10:09pm

https://www.boards.ie/discussion/comment/120462845#Comment_120462845

In the Opening post "... costing the Norwegian tax payer tens of millions". Tens of millions is what one governmment department spends on PostIt notes. Tens of millionsi s nothing.

There is a great clip from The West Wing, where Sam, the deputy communications director says his previous job meant he earned more than 37 times the average wage. I'm paraphrasing, his water didnt come out of the tap 37 times hotter, and the fire department didnt come to his house 37 times faster, so why reasonably should he pay 37 times more tax.

Which is a fair point of view.

Also, the rich have the means to avoid paying tax in a way the average person doesn't. If setting up a shell company in the cayman islands, and tunnelling your income via there, requiring one to pay a team of accountants to keep it all above board, is cheaper than just paying income tax in the country you reside in, then why wouldn't a rich person do that?

Murph85 · 10-04-2023 10:43pm

https://www.boards.ie/discussion/2058291844/evidence-that-wealth-tax-doesnt-work

Fg wealth tax of 50 % on marginally over minimum wage must be doing some damage!

Overheal · 11-04-2023 12:51am

https://www.boards.ie/discussion/comment/120462859#Comment_120462859

Sounds like all the conditions ripe for another housing capitalist to sweep in who can provide a service the other billionaire wasnt. Someone new can make their fortunes now.

This doesn’t prove wealth taxes don’t work it just proves more developed nations need them. Nowhere to abscond to when everyone taxes the same thing.

Jim2007 · 11-04-2023 1:00am

https://www.boards.ie/discussion/comment/120462990#Comment_120462990

Yuo need to stop digging! You don’t run in the right circles so you don’t get the insight!

Furze99 · 11-04-2023 9:48am

Well let the wealthy Irish go if that's their wont - if they don't want to live in their nation state, be taxed here and contribute to it's development, they're not wanted here.

If they enter the state for anymore than a couple of weeks per annum, then tax them to the hilt.

No time for people who say they are Irish but who pay their taxes abroad.

tesla_newbie · 11-04-2023 10:03am

its Interesting that a lot of wealthy individuals have been investing in farm land in recent years, very favourably taxation compared to other illiquid assets and no way will SF include agricultural land if a wealth tax is introduced?

magicbastarder · 11-04-2023 10:42am

'wealth taxes don't work when there are tax havens available nearby' shocker.

DownByTheGarden · 11-04-2023 1:55pm

https://www.boards.ie/discussion/comment/120463994#Comment_120463994

Sounds like peoples attitude to landlords for years :)

Be careful what you wish for.

Fred Cryton · 11-04-2023 2:09pm

https://www.boards.ie/discussion/comment/120463555#Comment_120463555

No answer then to my question. You said the flight of Norwegians was nothing to do with the wealth tax and now you can't back it up when challenged.

tesla_newbie · 11-04-2023 2:22pm

https://www.boards.ie/discussion/comment/120464962#Comment_120464962

No Government is going to whisper anything about a wealth tax when it comes to farmers, SF are no different on that score, a lot of long term SF farmer voters in places like Monaghan and the party are looking to grow amongst this demographic, incredibly powerful lobby group

SuperBowserWorld · 11-04-2023 2:28pm

You'd want to be extremely greedy and morally bereft to be a billionaire and desert the country that provided all the essentials for you to become a billionaire. Like clean water, air, food, education, health, policing, roads, ... for you and your family.

I could understand leaving a corrupt country. But Norway ???? To go to Switzerland.

Really, it highlights what some/many ??? rich people think of nations and the people who provide them with their wealth and power.

Fred Cryton · 11-04-2023 2:35pm

https://www.boards.ie/discussion/comment/120465125#Comment_120465125

Or you could look at it the other way - these people are often innovators and entrereneurs who provide employment and opportunities for their home nation, and all they get in return is another tax!

marathon2022 · 11-04-2023 2:53pm

I'm always a bit skeptical about poor billionaire story's, 5 minutes on google and my skepticism is only sky high

The paper owned by a Norwegian Billionaire

https://fortune.com/2015/03/07/fred-olsen/

Why is this agenda is so close to the heart of the current Olsen you might ask? https://en.wikipedia.org/wiki/Anette_S._Olsen

Like many owners of energy companies in the last two years (the majority owners of this newspaper, DN Media Group https://en.wikipedia.org/wiki/DN_Media_Group is owned by https://en.wikipedia.org/wiki/Bonheur_(company) ) hiked the costs of its wind energy to profit from the suffering of it customers, one of many examples of greedflation profiteering in the energy sector, resulting in the Norwegian government deciding to put steps into place to take back some of the money these energy companies have taken from its citizens.