[bryanlarsen]

> This creates a perverse scenario where business owners must extract dividends or sell shares every year just to cover their tax bill. With dividend and capital gains taxes at around 38%, you need to withdraw approximately 1.6 million NOK to pay a 1 million NOK wealth tax bill.

Why wouldn't you just take a loan against the assets? A few percent of interest is a lot cheaper than 38%. In Canada you used to have to pay taxes on unrealized option gains, standard procedure was to take a loan to pay taxes. If the options gains disappeared, you'd use your next years tax refund to pay back the loan.

[SiempreViernes]

If they took a loan then they would have to stay and waste this perfectly good excuse to do what they wanted to do anyway.

[cscurmudgeon]

> A few percent of interest is a lot cheaper than 38%

Not sure why that is comparable.

[vidarh]

Let's say you have a tax debt of 1m, and your choice is to take out a 1m net dividend. Now you have to pay dividend tax.

The other alternative is to borrow 1m, and pay interest on a 1m loan.

Unless you hold the loan long enough for the aggregate interest accrued until you're able to sell some shares exceeds the dividend tax, it's a net saving.

[cscurmudgeon]

Ah, ok. But how many illiquid companies pay out dividends though?

The real alternative is to not tax illiquid wealth.

[vidarh]

> Ah, ok. But how many illiquid companies pay out dividends though?

Ones whose founders have protected themselves against a significant wealth tax bill by ensuring investment agreements etc. protect their ability to. It's not rocket science to make this work if you worry about it.

> The real alternative is to not tax illiquid wealth.

Why? Taxing illiquid wealth has worked just fine in Norway for decades.

[ivanche]

And how would they pay back a loan?

[bryanlarsen]

Standard practice in America is to not pay them back, to hold the loan until death. The estate pays off the loan.

[vidarh]

If their business grows at a rate higher than interest, there's no reason why the bank wouldn't be happy to add the interest to the loan. If their business is growing at a rate lower than interest, it's a poor investment and they ought to sell it off and put their money somewhere else. Such as lending it out.

[ivanche]

This is just delaying the payment. OK, let's assume they do it for 1,2,3 years and that the bank is happy not to receive any payment in those 3 years. Now they've accrued interest-on-interest and the more time passes the more they'd have to pay back. So my question remains - one day they'd have to pay it back and on that day they'd have to sell assets and pay 36% tax.

[ag56]

> sell if off

To who? How?

[vidarh]

If you can't find a buyer, then close it down and sell the assets. The point being that if your business isn't capable of raising capital equivalent to 1% of its taxable value, then this generally isn't a reasonable business.

The valuation for tax purposes of unlisted companies is the taxable valuation of the company assets excluding goodwill [1]. In practice this usually means the taxable value of e.g. a startup tends to be quite low.

[1] https://www.skatteetaten.no/rettskilder/type/handboker/skatt...