Norwegian media, policymakers, and academics have been concerned over how the participation method (fritaksmetoden) and the taxation of dividends (aksjonærmodellen) works in Norway. Claims have been made that the taxation of shareholders leads to an accumulation of capital in firms because it is favorable to use firms as a savings vehicle, and that the system promotes inequality. It is a fact that the amount of capital accumulated in Norwegian firms has increased sharply after the tax reform in 2005/2006. 

The shareholder model (aksjonærmodellen) means that dividends and share gains after deduction of the normal return to capital (skjermingsfradraget) are taxable on the part of a personal shareholder, while the exemption method means that share gains and dividends between companies are exempt from the corporation tax. In a recently published paper in Samfunnsøkonomen, Petter Bjerksund and Guttorm Schjelderup study an investor who can invest in portfolios consisting of equities and a risk-free position. The Investor is faced with the choice between investing privately (directly) or through a company.

They show that the way the shareholder model is implemented in Norway creates an asymmetry in owner taxation that makes it profitable to save in shares through companies and to defer dividends. Even when the tax system is symmetrically designed, they show that it pays to keep the capital in the company if the investor's borrowing rate exceeds the interest rate used to calculate the normal return to capital (skjermingsrenten). Their study can explain the build-up of capital in Norwegian firms. They also point to that the most wealthy individuals in Norway are those that stand to gain the most from the system of shareholder taxation in Norway. 

Bjerksund, Petter, and Guttorm Schjelderup: Er den norske aksjonærbeskatningen nøytral? Samfunnsøkonomen, 2021, 135(4), 43-52.

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