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When a governmentDNBEU Your browser does not support the element. falls apart, pay attention to the laws ministers still manage to pass. Germany’s collapsing “traffic-light” coalition was unable to agree on climate policy or a budget, but it flashed green for one change: an exit tax. Since January 1st anyone with over €500,000 ($520,000) in investment funds has had to pay income tax on gains earned in Germany if they wish to extract their money from the country.Germany’s exit-tax enthusiasm is replicated across Europe. Norway’s government also brought in changes for the new year. In a second stiffening of the rules in as many years, rich Norwegians will now pay levies on dividends if they plan to remain outside their fatherland. A doomed French budget would have tightened an exit tax that left-wing lawmakers complain has been gutted. Dutch parliamentarians have instructed their government to investigate introducing an exit tax of its own.An exit tax can be a helpful piece of politics. So many rich Norwegians moved to Switzerland after the introduction of a higher wealth tax, that , Norway’s biggest bank, set up a Swiss office, and the socialist party created a “wall of shame” for émigrés. Exit taxes, swiftly toughened, then appeared to be prudent fiscal planning (and a way to shift blame to those who had upped sticks). In recent years Europe’s economy and stockmarkets have lagged far behind those across the Atlantic. This both increases the incentive for people to invest elsewhere and for governments to look for new sources of revenue.But how much money do exit taxes actually bring in? Not much. The well-heeled are well-motivated to find loopholes. European laws further complicate matters. Germany’s new rules may violate legislation protecting the free movement of capital, says Christian Kempges of Grant Thornton, a consultancy. Options on a more solid legal foundation, such as adding a “tail” to the tax, where departees are on the hook only if they sell their assets within a set number of years after leaving, create the opportunity for avoidance, according to Arun Advani of CenTax, a think-tank.This dysfunction shows up in revenues that are collected. Norway’s Ministry of Finance estimates its amended exit charge will raise $120m a year once its 12-year tail has run out, an amount equivalent to 0.04% of the state’s total revenue in 2023. Little surprise, then, that others are giving up on the taxes. Finland and Sweden both published proposals the year that Norway first tinkered with its measure, only to abandon them. For Norwegians sick of chocolate and yodelling, there may even be some relief: opposition parties are sceptical of the tax, and ahead in the polls.
