Norway-USA in contrast: Income taxation
On the EDGE: An opinion column about issues in Norway and the United States — Join the conversation!
M. Michael Brady
Norwegian and American personal income taxes are both alike and different. They are alike in the ways payment of them starts. In Norway, taxpayers file Form RF-1030 with Skatteetaten (The Norwegian Tax Administration), typically to a deadline of April 30. In the United States, taxpayers file Form 1040 with the Internal Revenue Service (IRS), typically to a deadline of April 15 (the taxpayer is not involved in the Social Security part of it, reported to the IRS).
Overall taxations also are nearly alike. As pointed out “Norway-USA in contrast: Wages and taxes,” The Norwegian American, April 26, 2016 (further reading), Norway is thought to be a high-tax country. That’s changing. According to the biennial OECD overview, Taxing Wages 2018 (further reading), the overall tax burden for a single person in Norway is 27.6 percent of wages, compared to 26 percent for the United States and 25.5 percent as the overall average for the OECD.
Despite these similarities, there are differences in the ways taxes collected are used to benefit the public. In Norway, healthcare is universal and available to all as an essential part of the modern welfare state (“Norway-USA in contrast: Different approaches to healthcare costs,” The Norwegian American, July 1, 2016, further reading). In contrast, the United States is the only modern affluent country without access to universal healthcare. Though private healthcare insurance is available and there are dedicated plans for needy groups, such as Medicare for persons 65 and older and Medicaid for those with low incomes, millions of residents have no health insurance, many because they cannot afford it. The plight of the uninsured (further reading) is a difference that blights.
Though there’s an intergovernmental agreement between Norway and the United States intended to prevent double taxation (further reading), there’s an apparent difference in the official attitude toward taxpayers. It springs from the United States being one of few countries in which taxation is determined by citizenship, not residence. In practice this means that a U.S. citizen having a bank account abroad or living abroad or both is required to file two tax forms: an Individual Income Tax Return (Form 1040) to the IRS and a Report of Foreign Bank and Financial Accounts (FBAR) to a relatively new agency (founded in 1970) to the Financial Crimes Enforcement Network (FinCEN), an Orwellian name that suggests that the targeted taxpayers must each year declare that they are not criminals.
The recent high-profile incident of a U.S. tax levy on British politician Boris Johnson illustrates a significant drawback of that practice. He was born in 1964 to British parents then living in New York City. His birth was registered both in New York and with the British Consulate, thereby making him a dual (USA-UK) national. When he was 5, the family returned to England. With time, Oxford-educated Johnson entered politics and became a writer, journalist, and columnist. He was a member of parliament for seven years before becoming the mayor of London in 2008. In an interview with National Public Radio (NPR) during a visit to New York in 2014, he said that the IRS had levied taxes on the capital gains from the sale of his first residence in Islington, North London. He found the levy “absolutely outrageous,” not least because he had not lived in the United States since age 5, but also because the sale was not taxable in Britain. The ensuing fracas culminated in 2016 when he renounced his American citizenship. It was not a lone decision. According to the U.S. Treasury Department, 5,411 individuals renounced their American citizenship that year.
These differences between Norway and the United States in personal income taxation suggest that Americans deserve more from the taxes they pay. Specifically, they deserve universal healthcare, not least in light of it being the norm, from as far away as Australia and as close as Canada. Moreover, this humble correspondent suggests that though there are apparently no published statistics on the matter, requiring Americans living or having bank accounts abroad to file an FBAR is no way to catch those among them who evade taxes.
• IGA—Agreement on automatic exchange of information to Improve International Tax Compliance and to Implement FATCA—with Annexes and MOU, Oslo, Ministry of Finance, Jan. 20, 2016: www.regjeringen.no/en/topics/the-economy/taxes-and-duties/skatteavtaler/agreement-norway—usa/id725490.
• Key Facts about the Uninsured Population, Henry J. Kaiser Family Foundation white paper, Dec. 7, 2018: www.kff.org/uninsured/fact-sheet/key-facts-about-the-uninsured-population.
• Report of Foreign Bank and Financial Accounts (FBAR), IRS, last updated March 4, 2019: www.irs.gov/businesses/small-businesses-self-employed/report-of-foreign-bank-and-financial-accounts-fbar.
• “Boris Johnson among record number to renounce American citizenship in 2016” by Patrick Wintour, The Guardian, Feb. 9, 2017: www.theguardian.com/politics/2017/feb/08/boris-johnson-renounces-us-citizenship-record-2016-uk-foreign-secretary.
• Two The Norwegian American articles: “Norway-USA in contrast: Wages and taxes,” April 26, 2016 (www.norwegianamerican.com/neighborhood/norway-usa-in-contrast-wages-and-taxes), and “Norway-USA in contrast: Different approaches to healthcare costs,” July 1, 2016 (www.norwegianamerican.com/neighborhood/norway-usa-in-contrast-different-approaches-to-healthcare-costs).
• Taxing Wages 2018, OECD, April 26, 2018, update of background data used in compiling 2016 The Norwegian American article above: www.oecd.org/ctp/tax-policy/taxing-wages-20725124.htm.
M. Michael Brady was educated as a scientist and, with time, turned to writing and translating.
The opinions expressed by opinion writers featured in “On the Edge” are not necessarily those of The Norwegian American, and our publication of those views is not an endorsement of them. Comments, suggestions, and complaints about the opinions expressed by the paper’s editorials should be directed to the editor.
This article originally appeared in the April 5, 2019, issue of The Norwegian American. To subscribe, visit SUBSCRIBE or call us at (206) 784-4617.