Behavioral Responses to Capital Taxation: Evidence From the Norwegian Wealth Tax

Abstract

Tax implementations give rise to behavioral changes among taxpayers, of which tax avoidance is a critical adaptation for policymakers to understand. Using Norwegian administrative data with individual-level tax records for 2015-2022, I identify three main legal wealth tax avoidance strategies used by Norwegian taxpayers to minimize their wealth tax liability. In contrast to previous studies, focused on singular aspects of avoidance or behavioral reactions to the tax, I identify multiple avoidance methods and quantify the annual revenue losses to the government associated with each one. I estimate a total of NOK 1,754 - 2,842 million in annual wealth tax revenue, or about 18 percent of collected wealth tax revenue, is lost to legal tax avoidance techniques.