In 2009, Nordlaks pulled in $62 million in profits on revenue of $207 million, making Berg, the sole owner, a very rich man. Although the Norwegian wealth tax includes generous deductions that allow Berg to report a net worth of about $30 million, far less than he would net if he sold his company, his tax bill is still substantial. Even if Nordlaks made no profits, paid no dividends, and paid its owner no salary, Berg would owe the Norwegian government a third of a million dollars a year. "Every year, I have to take a dividend, just to pay the tax," he says, sounding genuinely angry.
Berg is successful enough that paying the wealth tax is no hardship—in 2009, he took a dividend of nearly $10 million—but when a company slips into the red, entrepreneurs can find themselves in trouble. "If a company grows to a large size and then has two bad years in a row, the founder may be forced to sell some stock," says Erlend Bullvåg, a business-school professor at the University of Nordland and an adviser to the Norwegian central bank. But none of the entrepreneurs I spoke with had been forced to sell stock to pay their taxes—and Bullvåg, who has interviewed dozens of entrepreneurs on behalf of the Norwegian central bank, hasn't encountered a case personally. Berg told me that he hadn't given much thought to the wealth tax; he didn't even know exactly how it was calculated. "I get so pissed sometimes," he says. "But you just have to look forward, and it passes."
The posting of tax returns online makes tax evasion nearly impossible in Norway, but it doesn't stop the very rich from fleeing the country altogether. The best-known example is John Fredriksen, a shipping tycoon worth $7.7 billion and at one time the richest Norwegian. In 2006, Fredriksen, who had kept most of his personal assets outside the country to avoid taxes, renounced his Norwegian citizenship. He became the richest man in Cyprus.
Fredriksen's past is murky—he is reputed to have been one of the only exporters willing to do business with Iran after the revolution—and he rarely gives interviews. But in 2008, he told The Wall Street Journal, "It's almost impossible to do business in Norway today." Norway's prime minister, Jens Stoltenberg, dismissed the defection as no great loss—Fredriksen hadn't paid personal taxes in Norway for decades, and his companies continue to pay taxes in the country. Even so, Fredriksen is something of a folk hero to the entrepreneurs in his former home.
"He is cool," says Jan Egil Flo, chief financial officer of Moods of Norway, a $35 million clothing company in Stryn. I visited Moods of Norway's offices on my last day in Norway and chatted with Flo and his co-founders, Simen Staalnacke and Peder Børresen. The three were able to start their company, which makes fashionable sportswear and suits, largely thanks to the beneficence of the Norwegian socialist system. In 2004, they received a $20,000 start-up grant from the Norwegian equivalent of the Small Business Administration. Staalnacke and Børresen enrolled in a local college, because doing so meant the government would cover most of their living expenses. This may be why, when I ask the three founders if they might become Cypriots anytime soon, they protest. "No, no, no," says Børresen. "We've received a lot from Norway and Norwegian society. Giving back is not a problem."
Moods of Norway operates 10 boutiques, which, in a country of five million, means the company has saturated its home market. Two years ago, it opened its first store in the U.S., a 2,500-square-foot space in Beverly Hills, and Flo is in negotiations to open stores in New York City's SoHo neighborhood and Mall of America in Minnesota. It has been more challenging than he expected. "It's much easier to do business in Norway," Flo says. "The U.S. isn't one country; it's 50 countries." Although Norway may be more heavily regulated than America, the regulations are uniform across the country and are less apt to change drastically when the political winds blow.
In addition to regulatory stability, Flo pointed to a number of other advantages his company enjoys in Norway. Although personal taxes on entrepreneurs are high, the tax rate on corporate profits is low—28 percent, compared with an average of about 40 percent in combined federal and state taxes in the U.S. A less generous depreciation schedule and higher payroll taxes in Norway more than make up for that difference—Norwegian companies pay 14.1 percent of the entirety of an employee's salary, compared with 7.65 percent of the first $106,800 in the U.S.—but that money pays for benefits such as health care and retirement plans. "There's no big difference in cost," Flo says. In fact, his company makes more money, after taxes, on items sold in Norway than it does on those sold in its California shop.
Flo is pushing his business into America for reasons that have nothing to do with our tax structure. He wants Moods of Norway to be here because America is the largest, most influential market in the world. "There are more Norwegians in the Minneapolis area than in Norway," Flo says excitedly. "If you can get known in America, then the whole world knows you."
I heard this sort of sentiment from lots of the entrepreneurs I spoke with in Norway. They talked about the ambition and aggressiveness of American culture, which can't help breeding success. The younger entrepreneurs yearned for our tradition of mentoring, whereby seasoned entrepreneurs help nascent ones, with money or advice or both.
The more time I spent with Norwegian entrepreneurs, the more I became convinced that the things that make the United States a great country for entrepreneurs have little to do with the fact that we enjoy relatively low taxes. Kenneth Winther, the founder of the Oslo management consultancy MoonWalk, regaled me for hours about the virtues of Norway—security, good roads, good schools. But at the end of our interview, he confessed that he had been hedging his bets: He intended to apply to the American green-card lottery in January. "Why not try?" he said with a shrug.
