OECD urges Norway to cut wealth tax in favor of property and inheritance levies

The Organisation for Economic Co-operation and Development (OECD) has advised Norway to lower its net wealth tax, suggesting it could discourage investment, particularly in small and family-run businesses. The recommendation is part of a broader tax reform proposal that would shift the tax burden towards real estate and inheritances, while easing the load on labor and capital.

Norway remains one of Europe's few nations to maintain a wealth tax, originally introduced in the late 19th century. Currently, individuals with a net worth exceeding 1.9 million Norwegian kroner (approximately 172,000 euros) are subject to a 1% tax, rising to 1.1% for fortunes above 21.5 million kroner. The OECD report highlights that while the wealth tax has a significant redistributive effect, it may lead to negative after-tax investment returns.

The Norwegian Labour Party government, currently holding a minority in parliament, is planning a tax reform by 2027. The wealth tax is a contentious issue, with the right-wing opposition advocating for its reduction or elimination. Proponents view it as essential for fiscal justice and supporting the country's extensive welfare state, while opponents argue it drives away entrepreneurs and stifles innovation.

In addition to tax recommendations, the OECD reiterated its warning about Norway's increasing reliance on its substantial sovereign wealth fund, which currently stands at nearly 22 trillion kroner (1.99 trillion euros). Withdrawals from this fund, financed by oil and gas revenues and invested in stock markets, now account for 27% of public spending, a significant increase from previous levels. The OECD acknowledged Norway's status as one of the world's most prosperous and egalitarian economies.