Billionaire douchebag renounces US citizenship to save 3% on his taxes.

Renouncing Citizenship Makes Facebook Co-Founder Inadmissable To US

Facebook co-founder Eduardo Saverin's decision to renounce his U.S. citizenship just in time to avoid a large tax payment essentially means he will not be able to re-enter the United States again, immigration experts say.

"There's a specific provision of immigration law that says that a former citizen who officially renounces citizenship, and is determined to have renounced it for the purpose of avoiding taxation, is excludable," said Crystal Williams, executive director of the American Immigration Lawyers Association. "So he would not be able to return to the United States if he's found to have renounced for tax purposes."

The provision of law isn't usually enforced, added Williams, "however, this guy is so high profile that this is probably going to be the test case."

[...] Two immigration lawyers said his explanation hardly passes the laugh test. Saverin's move was timed to the initial public offering of shares of Facebook stock. The valuation of the Facebook IPO explodes Saverin stake in the social media company to some $3 billion, on which avoiding taxes could save him at least tens -- if not hundreds -- of millions of dollars. Nor does it help his case that he relocated to Singapore, which levies no taxes on those earnings.

Two senators mobilized Thursday to crack down on Saverin and other tax dodgers.

"He's fucked," said Adam Green, an immigration lawyer based in Los Angeles. "He must have gotten horrendous advice."

It's plausible that Saverin simply decided the money he'd save would be worth saying goodbye to the United States forever.

$100M is 3.3% of $3B. It's a rounding error to this bozo, but he thinks it's very important that he give none of that back to the people who made his lottery win possible. Bravo, Sir, you are a true Hero of Capitalism.

Previously.

Tags: , ,

75 Responses:

  1. J says:

    The Economist recently made the point that thanks to the exit tax passed a few years back, he's not really screwing the US as much as people seem to think (and, should FB actually go down (gasp), he could actually end up paying more than if he'd stayed)

    http://www.economist.com/blogs/democracyinamerica/2012/05/renouncing-citizenship

    • The Economist doesn't seem to realize that US citizens pay tax on their income every single year, regardless of location (minus tax treaties). He might be paying a big "exit tax" up front to get out of his future US income taxes.

      • tom says:

        @aaron He is a billionaire. He is never going to work another day for a salary and therefore will never be subjected to income tax again. He is being taxed on investment income, capital gains. Those are taxed separately and actually less than income is. Most investors pay a smaller percentage of their income in tax than an average working man. Which to some degree does not bother me because it makes it possible for a working man to become an investor more easily.

        This guy is scum. He made his fortune because of the united states, yet will not give even a penny back to it. He would rather ditch.

  2. It's going to be awesome when he gets kidnapped by vigilantes and held for ransom.

  3. meowrone catson says:

    he's not a douchebag, the incompetent idiot government pisses away the billionaires of dollars we pay in taxes to it. it's not like we would be seeing a penny of that 3% of his bilions of dollars if he was paying them anyway.

    • Joe says:

      Totally.

    • Indeed.

      ...what are these "road" things people keep talking about anyway? What is 'medicare'? Some sort of boondoggle pork-barrel nonsense, I'm sure.

      (Armies and navies, as everyone knows, pay for themselves because of fairy magic.)

      • bq Mackintosh says:

        Exactly. It's not as if the government established a predictable, enforceable market for retail securities speculation under the auspices of, say, a commission that regulates securities exchange. He MADE that money.

      • Glen Raphael says:

        These "road" things people talk about are (at the federal level) funded primarily by a tax on gasoline, not by the income tax.

        As for armies and navies, are you taking it for granted that spending more on them is a good thing? If people paid less in taxes and we therefore had less to spend on armies and navies, that soundes like a win all around.

        • Yes, yes, yes: some things the government does have different funding mechanisms, let's just pretend we're all well-informed adults here maybe? If I hadn't mentioned medicare and the military, you might have had cause for worry.

          And trust me, I would strongly prefer that we spend a lot less on the military (by an order of magnitude or ten), but I'm aware that you and I are apparently in a distinct minority by virtue of holding that opinion: people in general seem to like having an enormous army, but far fewer of them seem to remember that we have to pay for it.

  4. dano says:

    Love that the background in his head shot is Common Sense.

  5. acb says:

    OTOH, the US does require their citizens to pay US federal income tax on income earned abroad even if they live abroad. No other major economic power does this. (North Korea apparently does, for those few North Koreans living abroad with their God-Emperor's blessing, and a few minor countries have similar laws on their books.) Which makes being American abroad suck financially.

    • dano says:

      If a US citizen is expatriate and paying taxes to the country they reside in, they can get an exemption from US taxes. Check your tax attorney.

      • Q says:

        I worked in Canada for a few months and paid Canadian taxes, I actually got a larger US return at the end of the
        year because the US and Canada have a tax treaty and I moved back to the US, where taxes are lower than in Canada. I would still have to file a US return and a Canadian return if I had stayed there. For a couple of years I actually had 'loss' from the Canadian taxes, so it reduced my US taxes. Obviously the people who get benefits from the system aren't complaining and getting as much attention as those who think they are getting screwed.

      • Bob says:

        Not an exemption. Just a discount.

    • jwz says:

      Even if true, that's completely irrelevant to this situation. He started a company here, quit here, sued to get a bigger stake in it here, and is about to cash out of an IPO here, based on work he may or may not have done a decade ago, also here.

      • Chris Brent says:

        http://www.economist.com/blogs/democracyinamerica/2012/05/renouncing-citizenship
        He'll pay tax on his FB stock as if he'd sold it so don't worry his millions will go against our trillions of dollars of debt. This country makes it damn hard to get into if you want to bring money and expertise here, and even worse if you want to leave. The tax reporting requirements for expats are draconian, I can't see how this is bad advice if he doesn't intend on returning here!

      • the hatter says:

        Being a US ex-pat incurs a massive burden not just in the most obvious and direct ways but a lot of other pointless, expensive (and generally both) ways; as he hasn't been resident for a while, it makes plenty of sense for him to ditch his US citizenship. The downside is that the courtesies and respect you'd expect as a foreign visitor to the US are even less forthcoming, even when there's no hint of you having done anything wrong or even a bit shady - aside from having the audacity to admit you're more settled in another place (and of course the US doesn't allow dual-citizenship).

        I'd agree with you if your argument followed in reverse. But if I'm an ex-pat from elsewhere, residing in the US, did something abroad that would attract tax if I'd done it in the US, pay tax abroad, the US Treasury will still expect me to jump through a lot of hoops and quite likely express their desire for you to pay tax on it. And this is not just an issue for the likes of this man, it's proportionally a massively higher financial and time cost to normal US ex-pats.

        • Josh says:

          Wrong. The US allows dual citizenship (I know this because three generations of my family, including myself, are US-Canadian dual citizens).

          It's not 'encouraged' because it makes life more complex, but it is absolutely permitted.

        • Nick Lamb says:

          It doesn't really matter whether a country "allows" dual-citizenship. Your citizenship of a country is a matter between you and them. For example, suppose you're Iranian and move to the US, you become a resident, settle down, and eventually become a citizen. Even if the US were to (which it does not) produce a certificate which says "This person is 100% definitely not Iranian any more" the Iranian authorities don't have to pay that US certificate any attention. You're still an Iranian as far as they're concerned.

          Historically the US used to pretend that it had the power to terminate other citizenships, telling people that they had to "renounce" them or even insisting that they hand over identity documents issued by other countries. All that did was mean there was a fee from the other country to re-issue the pointlessly destroyed documents, so the US agreed to stop doing it.

          The treaties which manage relationships between sovereign entities concerning their citizens explicitly work on the basis that citizenship of the place where you actually are trumps other citizenships. So although ordinarily the US is supposed to notify the British embassy about hospitalised or arrested British citizens, if they are dual US-UK citizens then it has no such obligation, even if they are tourists rather than residents.

      • And?!? Who cares. Stop being jealous and envious. its his money and he earned it. Did he benefit from the freedom her? Sure. Does he owe "America" something? NO. Its his money and he owes nobody nothing. Except for those who think he owes them because they can't stand freedom.

        • phuzz says:

          If you live in a country, and earn money in it, then you owe taxes.
          In this situation, he earned money in the US, and when he leaves he will be paying exit taxes to the US. Why would he pay them if he didn't owe them?

    • Turtle Boughs says:

      This is an oversimplification, there are different tax rules for expatriate employees. The last time I checked, the income exemption was twice the average household income. That is, until you made double the average household income your earnings were free of federal taxation.

    • Chris says:

      I guess that was the point of renouncing his citizenship--so he wouldn't have to pay no matter where he lived.

  6. tjic says:

    I heard a story once about a guy who started a pasta sauce business in Little Italy, and then when it got big the local Mob wanted a 30% cut, so he moved the firm to Ohio.

    What a douchebag. What sort of person treats those who made his wealth possible that way?

    • Q says:

      Was the mob providing fire protection, police, sewage, streets etc.? That might be worth easily 30% of your profits. Profits, not gross income.

      I'm guessing the mafia provided none of those services and didn't care about gross income vs profit. It's like they aren't a government at all!

      • the hatter says:

        The mob definitely provides fire protection, and at least a fair attempt at policing. The corollary becomes apparent when you don't pay their taxes.

      • Jeez, wake up buddy.

        Those are all paid by state and local taxes, which are NOT covered by what this guy did. And even if they did, the would be wasted since thats what the govt does. Wow. Buddy.

    • So you equivocating the mob with the US gov't?

      I like the way you think. Thank you for showing how things really are.

  7. Matt says:

    I can't wait to see what Congress comes up with in their rush to do something about this terribly pressing problem. Even more exciting will be seeing how their incompetence in drafting it turns it into another AMT within a decade or two.

  8. Jerrold Poh says:

    Eduardo has been living in Singapore since 2009 (http://www.bloomberg.com/news/2012-05-12/facebook-co-founder-may-gain-choosing-singapore-over-u-s-.html) and has made no indication that he wants to move back to the US.

    If he were to renounce his citizenship anyway, it just seems good timing to do it just before the IPO.

    • Dave Pease says:

      no, its a horrible time to announce. if i told you i'd be giving you $billions, and i'd also give you an additional few $million if you agree to leave the united states and never return, surely even if you don't intend on living in the us again you'd forego the marginal gain just in case you wanted to have your pilot take you and your kid to disneyland or something, right?

      • nooj says:

        well, more important is the ability to go back to the us for future business opportunities. there are a lot of useful people who'd be willing spend five minutes listening to this guy, but who wouldn't fly to singapore first.

        this guys is basically saying, "dear united states: i'd rather negotiate a payment to come back later if i really have to than pay you now."

      • Jerrold Poh says:

        But you don't have to have a US citizenship to visit the states.

        I don't have US citizenship and have visited the states numerous times, and gone to Disneyland too :)

        • Dave Pease says:

          ftfa:

          "So he would not be able to return to the United States."

          My understanding is that's being told to fuck off when immigration identifies him, not just being unable to live in the US.

          • Jerrold Poh says:

            Wow why so angry?

            I guess I assumed when they said "return" it meant regaining citizenship, though I concede I misinterpreted.

            I don't claim to know the whole story, though from the Bloomburg article I linked it mentions that he was planning on staying in Singapore indefinitely, and also planned to invest more in Brazillian and Asian markets.

            Could have been just bad timing on his behalf.

            • Dave Pease says:

              im not mad, i'm just obscene. but i should be mad. you think we're saying 'lol, idiot fucked up' because he wouldn't be able to live in the usa anymore? we'd be idiots to say that! its clear one can live fine in many different places on the globe with $3b, and he's already in singapore.

      • Except he did it in Sept 2011. But jealous idiots like jwz here can't help but promote stupidity. "WAAA HE HAS MORE MONEY THAN MEEEEEE. TAKE IT LIKE THE NAZIS WOULD!!!1 IM SO JEALOUSSSSSS!"

        • jwz says:

          People sometimes ask me why I make fun of Libertarians.

          • Chintchary says:

            Still, the discrepancy between the Sept 2011 date and it being news today deserves explanation. Curtis Poe looks a bit at the people behind making this news: Senators preparing new shot in war against expats.

            • Beat me to it.

              I have a recurrent impression that many in the US have difficulties with the concept that there exists a world outside the US, and that the US does not have jurisdiction over it. Mind you I wouldn’t count jwz among them – so it’s telling that even he didn’t have any other frame of reference for Saverin’s actions than the US-centric one.

              I remember a certain quip about US domestic policy and US foreign policy…

              • In jwz's defense, the vast majority of the US news has presented a very biased story. It's hard to know what the truth is on hotly emotional topics that are being misrepresented by sources you trust.

                • I realise this. It was not a criticism of jwz, as I said. It just illustrates how inescapably the bubble biases your perception when you live inside it, no matter how unlike it you are. You can only compensate for biases you are aware of.

                  (Which is why this is not a blanket absolution of the rest of the world. Most of it is more aware of the US and the rest of the world than the US is of it, only because geopolitical the realities necessitate such awareness. Not because the people are less inherently lazy than Americans, or Americans more than the rest. (I know nothing about the goings-on in Africa and very little about the Far East, to my great shame. Every time I notice this I cringe anew, then inevitably fail to do anything about it yet again.) How aware and awake people in a society are (as a baseline) is a function of culture, not individuals – the people all have the same potential for mindfulness or slumber. Anyway, I’m leading myself off track here.)

          • Dennis Nezic says:

            I would certainly like to ask you that. From the little I know, it seems like your main objections center around emotional/aesthetic dislikes, and scarcely* any objective logical disagreements. This suggests cognitive dissonance -- a (subconscious) unwillingness to address the issue logically, so you cover this up with emotional ad-hominem: "Matthew Butch and that billionaire are just funny douchebags -- I will ignore them, and continue pretending involuntary 'taxation' is ethically justifiable."

            (In fairness, the issue is quite complicated... Eduardo may in fact be a douchebag, and may even in fact be complicit in the criminality of the State (corporations are State/fascist entities, does he support the laws that made him rich?, et cetera).)

            * A few days ago you casually offered a glancing rationalization for your beliefs, stating that we have an obligation to pay for unwanted/non-consentual things, but you cannot delve deeper than that.

            • jwz says:

              I don't argue with Libertarians for the same reason I don't argue with religious fundamentalists: it's a complete waste of everyone's time. I'm not going to change your mind, and you're going to eventually go Godwin.

              If you've been reading this blog for any length of time, my opinions on this are clear. If you think they require further explication, you're either not paying attention or you're just looking for an excuse to argue and complain. Either way, I just don't care.

              • Dennis Nezic says:

                I'm not a Libertarian -- they still "believe" that policing and courts have to be funded against my will. I'm a Voluntaryist -- which sounds simple, but is quite a powerful concept -- I try my utmost not to initiate violence against my innocent neighbours. That is indeed "my core belief". Do you really disagree with that? That was a rhetorical question: I think you do. Your "fundamentalist belief" is probably that it is justifiable to beat me up, in order to help the poor, etc. The interesting thing is another part of you doesn't believe in that -- hence the cognitive dissonance. Because if you were confident in your anti-voluntaryist beliefs, you wouldn't cower behind euphemisms like "taxation" or "immigration" -- you would call them for what they actually are -- (the majority) pointing real guns at unwilling people's heads (my head, your friend's heads -- any head who disagrees with you). If you really believed that roads and "public" healthcare are worth shooting people (arrogant douchebags, etc), then be proud of that position. Say that openly. It is the truth.

                I did a quick search of your views on libertarians. You seem to consider them as merely tinfoil-cap crazies, who "just want guns, drugs and brothels"[1], and who are deluded by this "libertarian utopia / fantasy"[2]. (The fantasy, of course, being: 'not initiating violence against your innocent neighbours.') It certainly doesn't help that Ron Paul, I think, is a bit nutty with his fundamentalist religious anti-evolution beliefs, and his hypocritical actions in office. I can certainly see where you get your impression of them from.

                In conclusion, I suppose there are two things on the table here. Douchebagism, and the core ideal of non-violence within the culture of Libertarianism. And, please correct me if I'm wrong, you are against both. (In the latter case, you are against it with respect to "public" healthcare / education / roads / et cetera.)

                [1] http://www.jwz.org/blog/2002/07/i-hate-your-politics/
                [2] http://www.jwz.org/blog/2002/07/hey-kids-lets-make-a-utopia/

                • bq Mackintosh says:

                  I'll take "voluntaryism" seriously (and since you want people to be clear and open: no, I don't take it seriously) as soon as someone points out a single instance in modern human history of a practical, sustained, large-scale, self-supporting, successful voluntaryist society. To achieve practicality, let's go with the following definitions:

                  Sustained = lasted at least 50 years, because I can't really see embracing something that won't be around as long as I am.

                  Large-scale = at least 4 million people participating, because I can't really see embracing a system that won't work for my metropolitan area.

                  Self-supporting = not a parasite state like Lichtenstein, and feature a legit producer GDP.

                  Successful = didn't degrade into a corrupt oligarchy or warlordy playground or other kind of situation that's nominally voluntarist but actually full of coercion.

                  Also, let's be clear that your cited society can't be kind-of-sort-of voluntaryist or just feature a couple of things that voluntaryists really like. Hong Kong doesn't make the cut because oops! Universal health care. South Korea is a good candidate except oops! Single payer health care system again. Also? Public sewers, building codes, and firearm regulation, and usury laws. And pet licenses. And seismic codes. Oh, and taxes.

                  Right! So, you provide just one example—just one!—of a society where people weren't forced into anything involuntarily, and the rest of us will stop rolling our eyes and feeling impatient that we have to explain, again*, why this kind of thinking is infuriatingly naive.

                  No philosophical gasbagging. Just one example. Go.

                  * This is why our host is declining to continue the conversation, I think. That, and the fact that people who rake in a bunch of cash from a regulated retail securities market because they founded a company that's based on the Internet and then claim that it's ALL THEIR MONEY THAT THEY MADE BY THEMSELVES WITHOUT THE HELP OF ANYONE ELSE AND YOU'RE TRYING TO TAKE IT TO FUND YOUR AWFUL GOVERNMENT THINGS LIKE THE COAST GUARD AND BRIDGE INSPECTIONS AND THE INTERNET are total, total douchebags, hello.

                  • jwz says:

                    Bravo. Yes, pretty much that.

                  • Dennis Nezic says:

                    Whether or not people lived morally before is irrelevant to whether I should live morally now. I do not claim to have any full-blown solutions for social organization. All I know, and it's not much, is that pointing guns at my friend's faces is not an option for me. I'm embarassed to say, that's the extent of my argument. This is probably why you can't take me seriously. I offer precious little to the table. All the real hard concrete work is beyond the scope of our expertises, and irrelevant. I don't know exactly how doctors will get paid, or how the roads will get built, or how seismic activity will be managed... I'm not saying everything will work out perfectly, nor that there won't exist disputable grey areas... but to claim that violent coercion is automatically necessary is an insanely bold and extreme belief to hold.

                    Somehow I doubt you put much thought into alternative non-coercive structures. I have a cynical hunch that you are probably just lazy and going with the status quo -- with the inertia of the current evil leviathan. Are you absolutely sure the seasteading project, or the free state project in New Hampshire are crazy ideas that will inevitably fail? Or are you really so amoral or cowardly or lazy that you refuse to budge until you see someone else do it first?

                  • 205guy says:

                    Whatever. And stop deluding yourself you're not libertarian. Don't you realize "non-coercive structures" is an oxymoron?

      • jon says:

        A million-dolllar ticket to disneyland? I think i'd pass.. thanks

  9. Notthebuddha says:

    slightly more details here: http://abcnews.go.com/blogs/politics/2012/05/senators-to-unveil-the-ex-patriot-act-to-respond-to-facebooks-saverins-tax-scheme/

    This could actually cost him money: personal capital gains maxes out at 15%, they treat it as sold immediately, and 15% of $3.84B is $576M. If he then liquidates part of his equity to pay the bill, it lowers the value of FB shares in general as he does it so he could easily end up $1B lighter and on the shitlist of the other principals. He'd need to do the odd-lots Michael Dell dance to sneak it out onto the market and still say goodbye to $600M-700M. Or he could not bail, and only pay 15% of what he sells off each year at a constant rate, like Bill G.

    • NotTheBuddha says:

      okay - apparently if he bails now, the current value of his stock stays fixed forever for US tax purposes, but isn't actually taxed until he sells it. This keeps him from having to dump a third of it and depress the value, but it's a gamble that the value will go up and stay up after the IPO, rather than decline. Or he could trade it for a tiny giraffe.

  10. curgoth says:

    For the Canadian version, google Conrad Black. Renounced his citizenship to become a British Lord, then got busted in the US for being a corrupt white collar thief. Once his US jail time was over, Canada decided to let him back in to move back into his mansion, despite his lack of citizenship. Money matters.

    • kstop says:

      IIRC, he's on a fairly expensive yearly visa, and had property and business ties. So they are dinging him for it. Plus he's a pompous buffoon, so it may have partially forentertainment value.

  11. Jon says:

    My impression of Eduardo is too influenced by his portrayal in "The Social Network". I can't help but think "aww, but he got fucked over in college, let's let him off. Group hug!"

  12. Marcin says:

    It probably was about the money. But, having said that ..

    I have Australian and Canadian citizenship; born in Canada but raised in Australia. I'm thinking of renouncing it in favour of Polish citizenship (which I can get through my parents) on account that it'd give me access to the EU which I found more interesting/enjoyable than Canada (not knocking Canada). So I can certainly see why someone could want to renounce their citizenship and don't see why it makes them (automatically) douchebag. Rupert Murdoch isn't a douchebag because he renounced his Australian citizenship, he's a douchebag because he's Rupert Murdoch.

    Who knows ? Perhaps he's had enough of the US and now that he's got his money, he can leave. Perhaps it's just you (the US), not him ?

    -Marcin

  13. The article you linked to is full of fail.

    First, the legislation they refer to which might prevent Saverin from re-entering the US is called the "Reed Amendment" and it's never been enforced because it's essentially unenforceable.

    Further, I note that the article, like most on this topic, leaves out a huge piece of information: covered expatriates.

    When you renounce your citizenship, there are several ways to become a "covered expatriate", one of this is to have a net worth over $2 million, which Saverin clearly does. In this case, the IRS assesses taxes against him as if he's liquidated all assets and sold them at the moment of expatriation, leveling a capital gains tax against it. Conservative estimates thus put his "exit tax" at around $300 million dollars. Saverin has already pointed out that he's subject to this tax and will be paying it.

    Given that the capital gains savings by renouncing pre-IPO is estimated to be between $37 to $100 million dollars, Saverin lost a quarter of a billion dollars by expatriating!

    So no, Saverin, a Brazilian living in Singapore, did not give up his US citizenship to save money. But since everybody is happy to bash him and doesn't give a damn about his side of the story ...