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22 November 2009
The Ex-Wives' Charter, Norwegian Style
In Cyprus recently for a family occasion, I met up for drinks with a Norwegian
girl-friend. Although it was only just lunchtime, Dolly was clearly somewhat
the worse for wear – this is what happens to all too many expats, of course,
not enough to do and too much spare dosh – and I've never seen her so
excited. "The swine," she said, and I knew she must have been referring
to her ex-husband, Knut, always known to everyone as 'Nuts' (don't ask), "He's
done me in big-time. Look at this!"
She thrust a copy of the local expat rag under my nose from two weeks before,
and the second lead was a story about the Norwegian taxpayers list. I had noticed
it myself in the British newspapers, but not having any Norwegian ex-husbands
I hadn't really stopped over it. In Norway each year the tax authority publishes
a list of how much tax everyone has paid, and from that you can work out something
at least of how much they're worth, although it only includes Norwegian income.
Two drinks later, after Dolly had calmed down a bit and stopped cursing out
Nuts, I got her to tell me what had happened. Nuts, who is a fairly successful
ship-owner, had returned to Norway to live in 2008 after the Norwegians improved
their tonnage tax (shipping tax) regime. He had been living with Dolly in Cyprus
for twenty years or so, where there is also a very good shipping taxation regime.
They were rather tired of each other, and they agreed in a fairly civilized
way to get divorced so that Nuts could marry his Swedish mistress. Dolly had
known about her for years. There was a hearing in Cyprus, property division
etc, and the Court ordered Nuts to pay Dolly 20% of his declared average income
to Dolly for life. Since he had declared income of 800,000 euros, and that didn't
seem unreasonable to Dolly, she accepted. EUR160,000 a year isn't exactly starvation
wages for doing nothing.
"This arrived today," said Dolly, shoving another piece of paper
across the table and knocking over her drink in the process. She was still quite
excited! By the time the waiter had cleared up the mess and we had got Dolly
another drink, the piece of paper was sodden and hardly legible any more, but
I could see that it was a document from the Norwegian tax authority, the Skatteetaten.
"But it's in Norwegian," I pointed out. "Oh yes, of course,"
said Dolly in that way of hers that makes you feel stupid, "Well, can't
you see the figure? Look!" She jabbed at the paper. And indeed I could
just about make out a figure with a lot of noughts after it. "It's forty
million," said Dolly triumphantly. "Krone of course. That's almost
five million euros. That's the tax he paid, so it means his income must be at
least double that. That's just in Norway. And he told the court he didn't have
any income in Norway!"
Dolly was working herself up into a righteous fury, so I tried pointing out
that maybe he had sold some shares, or a ship, and this was capital gains tax,
but she wasn't listening. She stormed off eventually towards her lawyer's office,
but it's hard to see what she can achieve except to pay a lot more fees and
get nothing.
After she left I sat over my drink, pondering the Norwegian system. Hardly
any other country does it, although in many countries, if you are in a public
position you are either expected to disclose your tax affairs, or in some cases
they are publicly available. Transparency is all the rage, nowadays, but the
Norwegian full monty seems to be going a bit too far. Or is it? Despite all
of the TIEAs being signed left, right and centre, and for all of the G20's grey,
black and for all I know purple lists, it's still not that difficult for a resourceful
and especially a rich and well-advised person to hide their international assets
and income flows. How fair is that on fellow taxpayers and ex-wives?
When it comes to public companies, which seek investment from joe public, the
situation is different, of course. They publish annual reports, which by law
have full details of income, expenses and taxation, along with lots of other
stuff. In most countries, the annual reports of even private companies are in
the public domain as well, although you have to pay to see them.
Why should individuals be different from companies? In the long term –
the very long term – the pressure for individuals to be fiscally transparent
as well will be too great to resist. This will happen because richer people
will always seek to live in and be taxed in lower-taxing jurisdictions, and
the day will come when the cash-strapped, high-taxing countries will club together
in a G40 or G60 or G99 to make the lower-taxing 'offshore' countries open up
their books. Once an individual's global fiscal affairs are captured on the
all-inclusive and public data-base that will then exist, secrecy will truly
have gone. You will still be able to live in Jersey and commute as a non-resident
to the House of Lords two days a week; but the days of pleading poverty to your
ex-wife will be over.
18 October 2009
To Will Or Not To Will?
Strange that The Society of Trust and Estate Practitioners should have come
out in favour of harmonized EU succession rules just in the week when I was
wondering whether it would be nice of me to go after my dead husband's house
in Italy.
Let me explain. We were married for nearly fifteen years when we agreed to
live apart. Or perhaps he left me. Or perhaps I left him. We each had a son
from a previous marriage. He (Henry) was always very generous to me with an
allowance, presents and so on. He kept sending money so that I could finish
off the house we had been building together in Wales. Now after another twenty
years he has died, and the lawyers are going berserk trying to work out what
to do with the house be bought himself in Italy, his first wife's house in Amsterdam
which still belonged to him, a pile of cash he kept in Guernsey and business
interests in the Netherlands and Ireland.
It all adds up to a couple of million or more, and Henry, who lived and died
in Cyprus, just a cap it all, didn't leave a will. We even talked about it sometimes
on the phone - we were always friendly. He worried that when he went - he was,
um, thirty years older than me - there would be a fight between his first wife,
who is Dutch, their son and me.
You see, the problem is that succession rules are different in every European
country, and in most of them (not in the UK) there are 'forced heirship' rules,
which put the interests of the family in front of outsiders, whatever a will
says. We don't even know where to apply for probate. In England? But Henry hadn't
been here for fifteen years. In Cyprus? But he had hardly any assets there;
he lived in a tiny flat on the beach. In Italy? The lawyers say I should go
there (or they should go there) and start proceedings just to stake a claim.
It's called forum shopping. Now that's one kind of shopping even I never thought
of! But Henry's body is hardly cold. It doesn't seem right.
Henry wanted his son to have the Italian house, which is the biggest asset,
but couldn't regulate that with a will; Henry thought that he had done well
by me, and that's true. I am quite well off with the house and the pension he
has left me.
And yet, and yet. I don't get on with his first wife, and she could have a
go at the house. The pension is safe because I was the named beneficiary, but
the house is still in Henry's name. I know he wanted me to have it; he said
so often. I called his first wife to talk about it, but she hasn't called me
back.
Oh dear, what to do? We are all going to Cyprus to bury him this week. It should
be an interesting funeral!
Anyway the point of this tale is that one should think twice about property
investment. At least with cash or shares they are moveable, and if your family
relationships change you can adjust your holdings quickly and easily. But with
houses, it's like supertankers, it takes years to unscramble a situation. So
this is one piece of harmonization I am really in favour of. You can bet the
lawyers are against it, though!
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