Norway Tax Data Now!

It's the moment nosy Norwegian neighbors have been waiting for — the release of official records showing the annual income and overall wealth of nearly every taxpayer in the Scandinavian country.

In a move that would be unthinkable elsewhere, tax authorities in Norway have issued the ''skatteliste,'' or ''tax list,'' for 2008 to the media under a law designed to uphold the country's tradition of transparency…

Many media outlets use the tax records to produce their own searchable online databases. In the database of national broadcaster NRK, you can type a subject's name, hit search and within moments get information on what that person made last year, what was paid in taxes and total wealth….

The information had been available to media until 2004, when a more
conservative government banned the publication of tax records. Three
years later, a new, more liberal government reversed the legislation
and also made it possible for media to obtain tax information digitally
and disseminate it online.

There has got to be more than one dissertation here.  Aside from the obvious issues of studying the distribution of wealth over time and cross-sectionally the three year break raises possibilities such as testing whether making salary and wealth information public encourages people to work more or less and  whether public information about income increases or decreases inequality.

Perhaps most interesting–does conspicuous consumption fall and efficiency increase in a society in which income is conspicuous?

Comments

I've been complaining about Alex posts lately, so I'll come out first and say that this is a very interesting post, and I'm glad it came to my attention. And yes, it will be interesting to see the effect on conspicuous consumption, since it's hard to fake it when everyone knows exactly what you earn.

Is the divorce rate for couples married during non-disclosure periods higher?

You ask a very difficult (though compelling) question. My first thought is that no, conspicuous consumption (or the related pecuniary emulation) wouldn't change a bit. It has been awhile since I last read Veblen, but I seem to recall that both practices are a matter of culture more so than brunt economics. Simply being rich is not enough, one must surround himself with the toys that wealth confers to truly flaunt. Likewise, consumption gives of not just a signal of wealth but tastes associated with being wealthy.

Pecuniary emulation works in much the same way, even if there is some laundry list that proves one is not as rich as he claims, it is a matter of showing you have the tastes of the elites, and thus share some traits with them. Lastly, and this is a far more pragmatic answer, I believe this practice's effect on conspicuous consumption and pecuniary emulation (if there is one) decrease drastically as the population of the society increases. Imagine the page count of an American income list. It is entirely unlikely, people are going to check a log to determine if that guy driving a Mercedes is really rich or not.

I love that they use the word 'subject': "you can type a subject's name...". Hilarious.

This is an old practice in Norway, and the intention was to make the tax system transparent, so that people could check that noone had unfair advantages. The data were available on demand to anyone, but before they were put on the internet that really just meant that is was available to journalists, who used it for research.

Searchable tax databases on the internet changed this into something new and unintented: a tool for snooping on your friends, neighbours and colleagues, (as well as for criminals, who can easily find the richest people in a neighbourhood). The media organizations defend these databases with lofty ideals about democracy and transparency, but what they're really doing is providing a fun service that generates a lot of profitable internet traffic, (while incidentally also destroying a good chunk of our privacy).

So here's a question for the economists: Is it possible to fight a practice that is 1) bad for society, but 2) profitable for the media, and 3) fun?

In my genealogical pursuits, I discovered the local paper in Ontario County NY published the amounts of income taxes paid by each person for 1864 or 65. And the Broome County government in 1940 published a hardbound book recording all its disbursements. Our ideas of privacy have changed over the years.

So, it's been done and the country of Norway has not collapsed, but remained a nice place to live, albeit a bit cold in the long winter.

Another research question might be whether this affects public versus private salary levels in some way. In the US, public managerial salaries are usually more available that private sector managerial salaries (not counting top executive level at public companies).

"skatteliste": fascinating - as in the old expression "scot-free", meaning free of tax?

There are privacy interests, and tax fairness interests. It seems to me that the best balance would be to publish detailed tax data for the top 1% or so of earners (who are most likely to do large scale tax avoidance, with serious consequences for the budget), but just aggregate data for everyone else.

If it works at all in Norway, that is.

Anyone have a link to one of the databases?

It might be of interest to note that annual tax payments were open and published in the 19th century in the Netherlands, while today such openness would be seen as a gross violation of privacy. A few years ago a researcher got a PhD for studying elite continuity. She dug up the old State Courant and looked how well their great-grandchildren were doing today.

The key reason they were published at that time was 19th century census voting. One had to pay taxes to get the right to vote and in particular one had to pay a substantial amount of taxes even to become eligible for becoming a representative. For the 2nd chamber [house of commons] a minimum annual tax payment of 1.000 guilders was required, for the 1st chamber [senate] a minimum annual tax payment of 10.000 guilders was the treshold.

Multiply that amount by about 40, to compensate for inflation, the change from guilder to the euro, as well as the expansion of taxation to fund the welfare state. One then grasped that not only becoming a Senator was definitely within a poor men's reach, but also why the few socialist parliamentarians in the Netherlands were mainly Reverends, medical doctors and academics.

But openness was required to allow the general public to check whether someone was eligible to run for parliament and the higher offices.

Off course that kind of openness also kept a far stronger scrutiny open for the general public on politicians using their position for private gains.

The eligibility for public offices, when one paid a substantial amount of taxes, with a skewed scale for higher tax payment requirements when one desired to be eligible for certain more prestiguous offices seems to have taken away many of the privacy concerns.

As with universal suffrage, the tax data became a non-disclosed private matter, that obviously increased the opportunity for politicians to advance in wealth during their office.

One could imagine that openness in the USA on the tax filings for elected politicians or appointed Administration members might be more effective than campaign finance reforms. A permanent register however would be needed to avoid the situation of "making big bucks" after office, due to opportunities created while in office.

Hmm, I think my post may have disappeared. Apologies if this gets posted twice.

Anyway, VG, a Norwegian tabloid has created a website which you can consult at skattelister.no/skatt/

If you click on my name you can see my results as an example (it's not much considering I graduated last year and only worked two months)

"Inntekt"=income "formue"= net wealth and "skatt"=tax paid

Inntekt is income after deductions, "Beregning av egentlig inntekt" is an estimate of income before deductions which in my case at least is pretty close to the truth.

Personally I dont really mind much, but it's a big deal for some people

I enjoyed the way that article described those who want to hide the way the government collects its money as "more conservative."

Those who want transparency into government operations, of course, are "more liberal."

If you can find a description of anything more bass-ackwards than that, I'd love to hear it.

Alex,

There is an interesting discussion of this here: http://www.finlandforthought.net/2007/11/22/transparency-vs-underground-economy-another-myth-busted/

Some quotes:

In Norway, according to the government tax authority’s web site, 45% of people over 18 years old have purchased unreported labour. It was described as “underground economy† labour. There are probably similar levels in Sweden and Finland as well.

The article showed that there was, among all the European countries featured, the most dramatic growth of underground economic activity in the Scandinavian countries between the years 1960-1995.

"So norwegian men don't have to signal their wealth and can't pretend to be wealthy. Do they buy expensive cars and dinners at all? Do norwegian women pretend to be interested in their dates profession and function within his firm, even if he is in risk management or quality assurance?"

Hrm, that's very interesting, tell me more?

One society is based on "life, liberty, and the pursuit of happiness". The other is centered on what everyone else earns and what they possess.
Now, tell me: which is the materialistic society?

Do you think it would be fair to log identities of people who searched someone's records and display them to the "subject"?

(This would, of course, need good authentication mechanisms, but this is feasible in current IT.)

In a move that would be unthinkable elsewhere, tax authorities in Norway have issued the ''skatteliste,'' or ''tax list,'' for 2008 to the media under a law designed to uphold the country's tradition of transparency.

Finland does the same thing, and so does Sweden, so it's not "unthinkable elsewhere".

In the world of Internet dating in the US, many women face challenges in determining how much their prospective dates make and how much they are worth. The dating service profiles contain spaces for people to display their income ranges, but it is widely believed that many guys exaggerate their incomes. And, except for a few specialized dating services, there is no space to reveal one's net worth.

As a result, women have developed a number of proxies for income and net worth, such as occupation, neighborhood, etc. These proxies are imperfect at best. Some doctors have modest incomes while some are rich, for example. If the IRS published a searchable database as Norway does, this information would be easily obtainable and search costs would be lowered.

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