Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Taxing unrealized gains has caused an entrepreneurial exodus in Norway

paragraph.xyz

Post reply on HN
Print view View original

101–110 of 150 posts

Re: Taxing unrealized gains has caused an entrepreneurial exodus in Norway

#101

Post by cadamsau »

vidarh wrote: post #57
mediaman wrote: post #26

Norway doesn't care. It is a country with a reputation for good governance and northern-European economic strength. But economically, it is a country that is largely a gas station: like a democratic Russia with more competent governance. 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 half of the value of exports is oil and mining, but oil production, mining and quarrying directly employ only about 23,000 people, compared to 190,000 in manufacturing for example. 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 expo…

Warning: not an economist :)

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.

Re: Taxing unrealized gains has caused an entrepreneurial exodus in Norway

#102

Post by psd1 »

no_wizard wrote: post #31
barbazoo wrote: post #19

Earlier quoted context omitted.

Wouldn't that be more communism than socialism?

The unpolluted definition of socialism is about public (e.g. social) ownership of the means of production. Technically, it’s not mutually exclusive of market systems, simply that participants are socially owned in some form. To be more specific about what I said, the roots of socialism called for the “seizing of the means of production” if governments and capital would not voluntarily convert to some form of social o…

Very nicely put.

If you have an innovation fixation and only give a shit about unicorns, you aren't going to even perceive the cooperatives and mutuals that have survived six monarchs. Especially if they are mostly outside your country and you're congenitally parochial.

Re: Taxing unrealized gains has caused an entrepreneurial exodus in Norway

#103

Post by vlovich123 »

thrw42A8N wrote: post #62
jplrssn wrote: post #44

Earlier quoted context omitted.

It's a good question. If that were the case, I would have expected to also see other oil rich countries at the top of those rankings.

Norway is uniquely located among those, though.

It’s uniqueness is more how they manage their petrol dollars through a government investment fund rather than subsidizing government services directly or giving back the money to buy popular support like you see in Alaska.

Re: Taxing unrealized gains has caused an entrepreneurial exodus in Norway

#104

Post by HPsquared »

vidarh wrote: post #84
Aeolun wrote: post #81

Earlier quoted context omitted.

Everyone starts a company with the idea it may never apply to them, so why worry about it before it becomes a problem. Of course, with the leaving tax, they may just move abroad before doing anything.

It was not that it didn't apply to me. I've had shareholdings in Norwegian companies worth well over the deductible several times. The point is that it isn't a problem in practice as long as you're aware of it and plan accordingly. Yes, if you start a company in Norway without a liquid market for your shares, and without understanding the tax implications, you might end up having a bad time of it. If you spend an hou…

In accounting terms I guess the tax burden just decreases the NPV of all assets.

Re: Taxing unrealized gains has caused an entrepreneurial exodus in Norway

#105

Post by danudey »

Aeolun wrote: post #75
jplrssn wrote: post #8

Not surprising that an Atlas Shrugged reading entrepreneur dislikes taxation. 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, saf…

Anyone that gets taxed more than they have money to pay is inclined to dislike that taxation. I completely agree with the wish to not cannibalize hour company before it’s even properly profitable. They’re ‘unrealized gains’ for a reason. That said, I also feel there is a way to do this tax properly.

> They’re ‘unrealized gains’ for a reason

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?

Re: Taxing unrealized gains has caused an entrepreneurial exodus in Norway

#106

Post by vidarh »

freefaler wrote: post #52
skobes wrote: post #38

Earlier quoted context omitted.

> 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... 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.

In some states there are, which is also a bad & unjust practice. The difference is that the rates are between 0.49% and 2.5% and reassessment period differs between the states/localities (these are local taxes). This is way less that the proposed Norway taxes and "value" can be established much more justly than a "startup shares".

> This is way less that the proposed Norway taxes and "value" can be established much more justly than a "startup shares".

The Norwegian wealth tax is 0 up until ~$150k, then 0.7% local tax and 0.3%-0.4% to the state.

So 1%-1.1% above the threshold. But this is of taxable value which for shares is discounted 20%, so the actual tax rate is ~0.8%.

But again, for unlisted companies, the taxable value is the taxable valuation of company assets excluding goodwill, so in practice, it's even lower than that.

Re: Taxing unrealized gains has caused an entrepreneurial exodus in Norway

#107

Post by vidarh »

freefaler wrote: post #95
asadotzler wrote: post #70

Earlier quoted context omitted.

So, it's OK if it has rules and the Norway laws don't have any rules... is that what you're saying here/

The principle of taxation without value exchanging hands will lead to bad consequences, this is the point I'm trying to make. What will Norwegian's representatives do they will do. It's stupid and will lead to bad things down the road. Norway is rich and can afford stupid politics for now. It's also morally wrong, but morality and taxes are not the same.

Norway has done this for many decades. It's worked just fine.

Morality is subjective, so it's meaningless to argue it is morally wrong without making an argument for why.

Re: Taxing unrealized gains has caused an entrepreneurial exodus in Norway

#108

Post by no_wizard »

Aloisius wrote: post #97
no_wizard wrote: post #91

Earlier quoted context omitted.

So called Buy Borrow Die strategies are one way[0][1]. Another (and this is what I’m referring to) is leveraging SBLOC[2][3], USLOC, HELOC and alternative asset type loans to borrow against their assets without tax consequences. These loans are made at below market rates of interest more often than not as well. They’re not paying 7.25% on these loans. Yes, banks are willing to take a potential loss on these loans to…

> They’re not paying 7.25% on those loan The rate I gave was for Bancorp's best SBLOC, for loans of over $10 million. HELOC rates (home equity loan) are anywhere from 7.65-8.6% right now. It doesn't take many years before you end up paying more in interest than you would have had to pay in capital gains - and of course, you need to pay back SBLOCs every year with interest, so you're having to sell assets - and paying…

If you want to know what they’re paying interest rate wise you aren’t going online to find it. We are talking about private bankers and exclusive preferred lender terms. These do go below (sometimes far below) market rates.

We are talking about folks who typically have 50 million USD+ in assets. They may even do all this via their own private corporation investment vehicles which further skews things.

This is why I was talking about wealth qualifications. all these loan types can be used in other scenarios, but the scenario I reference has a certain pattern to it that is unique to tax avoidance schemes. It’s a combination of factors not only one thing.

Let’s take it at face value though. How fast do you think Mark Zuckerbergs wealth grows in a year? Or how about the CEO of any major corporation for that matter? Or even someone who heads a private company with say $150 Million ARR?

Do you think it’s less than 8%? Heck do you think it’s less than 15%?

And this is before we start accounting for things like tax deductions for the interest paid on the loans

Re: Taxing unrealized gains has caused an entrepreneurial exodus in Norway

#109

Post by danudey »

dzhiurgis wrote: post #46
elygre wrote: post #42

Earlier quoted context omitted.

They left because they didn't want to pay taxes. No monkeying about, they want to be rich and tax free.

How do you pay taxes for something that doesn't exist with money you do not have?

I think the issue that these laws are trying to solve (and perhaps not with sufficient nuance) is that the ultra-rich get paid in stock or options, which then go up in value. Those "unrealized gains" aren't taxable (because they're only theoretical at this point), but they're still able to go to the banks and borrow against those gains anyway to fund their lifestyle tax-free.

Obviously you need to be a bit sane about it; I have "unrealized gains" by virtue of having stock options in a company, but while I'm paid well I'm definitely not rich by any stretch. I'm just some dude with stock.

Re: Taxing unrealized gains has caused an entrepreneurial exodus in Norway

#110

Post by HPsquared »

tzs wrote: post #99
dzhiurgis wrote: post #53

Earlier quoted context omitted.

Yes and property taxes are terrible. Tax. Vacant. Land.

In the US property taxes largely go to fund public schools, local police/fire/emergency medical service, parks, roads, sewer, water, and trash collection. Generally the amount you need for such services is more a function of how much non-vacant land you have in the area than how much vacant land, so unless switching to just taxing vacant land was accompanied by some tax on something else to cover the aforementioned t…

The fairest system would be a flat tax per person, surely. Each person will use a pretty average amount of state resources. It's expensive to live in California, after all.
Post reply on HN