Recovering Nordic region mulls return to raising taxes on rich

With the pandemic mostly behind them, Nordic countries are placing themselves in the vanguard of global economies trying to get rich people to fund public finances more in the aftermath of the ordeal. 

In Norway, the Labor Party that just won last month’s election wants to roll back cuts in the country’s wealth tax enacted by the previously Conservative-led coalition. Meanwhile Denmark is proposing that its “richest 1%” pay more on dividends and capital gains from shares. And Finland’s government is poised to impose an exit levy aimed at affluent emigrants.

With Joe Biden’s administration trying to raise taxes on Americans earning more than $400,000, the Nordics are hardly alone in focusing on the wealthy after a global crisis that disproportionately hit lower-paid workers just as stock markets and real estate soared. 

With that new legacy of inequality left by the pandemic, the region’s shift signals a yearning to return to more egalitarian foundations funded by a traditional high-tax model that governments had started to scale back, as with many advanced economies.

“In the long run, we’ve seen a trend towards the decline of taxes that are predominantly levied on the wealthy,” said Sarah Perret, an economist with the Centre for Tax Policy and Administration at the Organisation for Economic Co-operation and Development. “We’re seeing growing interest now from governments in taxing top income earners and top wealth holders.” 

The Nordics have more experience than most in targeting the rich, with a history of controversy after some of their most prosperous citizens sought exile as an alternative to paying quite so much. 

“Now that leftist governments are in power, we should expect more leftist policies,” Sanna Kurronen, an economist at Helsinki-based Business and Policy Forum EVA, said. 

Taxing the wealthy is now a political issue in every country of the region again, even if not all have opted to increase the burden at present. Here’s a quick overview. 

Norwegian squeeze

The Labour Party, now in talks to form a new ruling coalition, has pledged to increase to 1.1% the tax on wealth exceeding 1.7-million kroner. That compares with 0.85% now, on a threshold of 1.5-million kroner. The top rate would be 1.3% on assets exceeding 20-million kroner. 

The levy was cited as a major factor in decisions by wealthy Norwegians who have emigrated, according to a survey of 400 of them by consulting firm NHHS published in May.

Finnish fix

In Finland, people emigrating would have to pay tax on unrealised capital gains accumulated during their time in the country if they dispose of any assets, starting in 2023. Finance minister Annika Saarikko estimated this month that it may raise revenue of about €25m.

A report in 2020 by the finance ministry advised against such a tax because it would be challenging to implement, would complicate the system and would end up targeting too few people.

Danish gains

Prime minister Mette Frederiksen’s administration wants to target the country’s richest citizens to fund a measure that would motivate elderly workers to stay in employment and increase the supply of labour. 

Danes would have to pay 45% of gains on shares exceeding 56,500 kroner a year instead of 42% now. The rate for profits below that threshold would stay at 27%. 

“At a time of quite high gains on the stock market, we are asking that you will pay a small amount extra in taxes if you have very big gains,” finance minister Nicolai Wammen told reporters in Copenhagen last month.

Sweden, the largest Nordic economy, scrapped its wealth tax in 2007 because of evidence it didn’t work as intended. Then last year, the government abandoned a measure targeting the highest earners amid pressure from liberal parties. 

Social Democrat finance minister Magdalena Andersson, who is widely expected to replace outgoing Premier Stefan Lofven in November, has sought an extra tax on millionaires, but the proposal has little support in parliament.

Meanwhile in Iceland’s elections last weekend, the Social Democrats suffered among the biggest losses after advocating a wealth tax. Premier Katrin Jakobsdottir, whose Left Green Movement also slipped, had sought a progressive levy on capital gains. 

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