Just in time for the unveiling of the Facebook public offering, Facebook cofounder Eduardo Saverin is renouncing his US citizenship and becoming a citizen of Singapore, instead. His spokesman has announced:
“Eduardo recently found it more practical to become a resident of Singapore since he plans to live there for an indefinite period of time,” said Tom Goodman, a spokesman for Saverin, in an e-mailed statement.
The move is widely perceived as a tax dodge.
Besides helping cut tax bills stemming from the Facebook, the move may also help him avoid capital gains taxes on future investments since Singapore doesn’t have a capital gains tax.
A tax expert weighs in on the
savviness of the move:
The 27-year-old Facebook Inc. founder could face a tax bill of more than $1 billion after the company’s initial public offering, expected next week.
“It's definitely savvy tax planning,” said Edward D. Kleinbard, a professor of law at USC who specializes in federal tax policy and international taxation. “He can argue that the value of the Facebook shares in September, when he gave up his citizenship, were significantly less than the value that will be set at the IPO next week.”
However he
won't get away entirely scott-free:
Saverin won’t escape all U.S. taxes. Americans who give up their citizenship owe what is effectively an exit tax on the capital gains from their stock holdings, even if they don’t sell the shares, said Reuven S. Avi-Yonah, director of the international tax program at the University of Michigan’s law school. For tax purposes, the IRS treats the stock as if it has been sold.
Renouncing your citizenship well in advance of an IPO is “a very smart idea,” from a tax standpoint, Avi-Yonah said. “Once it’s public you can’t fool around with the value.”
Bloomberg News says this is a growing trend, in advance of a 'possible' increase in tax rates, without providing any backup:
Saverin, 30, joins a growing number of people giving up U.S. citizenship ahead of a possible increase in tax rates for top earners
Ilysa Hogue
weighs in on this move at The Nation and reminds us how the US enabled such an enterprise to flourish, by having a functioning society, brought to you with the assistance of government regulations, and funded by taxes.
Writer Farhad Manjoo does an excellent job at pandodaily identifying all the ways that young Eduardo’s years in the United States played a role in the financial bonanza he’s about to experience. Starting with the obvious protection from kidnapping that wealthy people generally enjoy here in the United States all the way through the reasonably functional US court system that awarded him the shares that are about to make him a billionarie, this country played a critical role in this young man’s life. In return, Saverin has decided to relocate to Singapore, where he’ll pay no capital gains taxes on any Facebook shares he sells in the future. In fact, he’ll only pay an “exit tax,” which will be determined by his own team’s estimated value of his net worth at the time he renounced his citizenship. This little move could cost the US Treasury as much as $600 million dollars. That’s a novel way to thank your adopted country.
Saverin exemplifies the spoiled 1 percenter who erodes the fabric of the country that afforded such opportunity by not paying back the investment America made in him. His decisions are a slap in the face of every person who recognizes that, to be a place that can facilitate the birth of new innovations like Facebook, the United States needs resources. Doubt that? Remember what government funded the research that created the Internet and the web? Harvard University, where the Facebook plot was hatched, took in almost $700 million in federal grant support for tuition and research last year alone. But Saverin’s decision is even more insulting to the millions of his less wealthy fellow immigrants who work hard to gain the privilege of giving back to the country that affords them opportunity to pursue their dreams in relative safety. Not to mention the DREAMers who offer to fight and possibly die for the country that they yearn to make their own.
Comments around the internet regarding this move are suprisingly (to me)
critical, making the observation that the supposedly harsh regulations killing the business environment in the US didn't prevent him from starting the company and Facebook from flourishing, and call for him to take responsibility:
How could you say it's brilliant? It's an asinine move if you ask me. Making all of you money here in the U.S. and then, running away from your responsibilities (Pay U.S. taxes). Only idiots would think that that's a brilliant move.
Doesn't change him being a weasel. And your tax argument... we are recovering from a recession. It is always raised. Last to do it? Bush, Sr.
The guy is a weasel. A savvy weasel. Hopefully he can never return to our country if he does not want to pay what we all pay.
It's time for Saverin to give back, not cut and run.