
Secret Bitcoin billionaires to renounce their US citizenship before cashing in? - prklmn
http://blogs.harvard.edu/philg/2018/02/03/secret-bitcoin-billionaires-will-renounce-their-u-s-citizenship-before-cashing-in/
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yardie
As an American expat my experience far more people are moving to the US for
tax reasons than are moving away. Out of all the western democracies it’s
still one of the lowest taxable rates.

Most people surrendering citizenship aren’t doing so to avoid taxes. They are
doing so to avoid double taxation.

A Bitcoin billionaire is either paying the US 15-20% capital gains tax or
France, for example, 45-50%. Either way, Caesar still gets his due.

~~~
charlesdm
Following countries allow you to cash out Bitcoin tax free, if you're an early
holder: the UK, Ireland, Cyprus, Malta, Belgium, Netherlands, possibly
Germany, Switzerland, Singapore, the UAE, Monaco, the Channel Islands,
Andorra, Italy (if you pay a €100k levy), Portugal, Singapore, and I probably
forgot another dozen countries. Pretty much half of Western Europe.

If you have the money, most of these countries offer great quality of life. If
you're sitting on a $100m gain.. it's worth it. A change of scenery isn't
always bad in life. Personally I would never voluntarily pay 20% on a massive
gain if there is a legal way to avoid it.

I guess what this article is implying is, since the US treasury does not know
of the existence of these Bitcoins, people can easily renounce (committing US
tax fraud in the process) and cash in.

~~~
berberous
If I was sitting on a $100mm windfall, paying $20mm seems like a no brainer to
be able to live in or at least visit the U.S., where presumably all of your
friends and family live, without worrying about being arrested for tax fraud.

Not to mention the moral arguments in favor of paying the taxes you owe.

~~~
charlesdm
The only taxes you owe, are the ones you legally owe. Saving on taxes also
doesn't mean you can't give back.

You can support promising artists, give grants to talented people, help people
out who can't afford their medical bills, end up in a bad legal situation,
etc.

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dheera
Bitcoin billionaires would just pay the taxes. $500 million and a lot of time
is worth WAY more than $1 billion and time wasted dealing with crap. It's way
more money than I would ever know what to do with, anyway. Life with $500
million and $1 billion would not be very different.

It's people with $100k of bitcoin that are more likely to want to go through
troubles to not have to pay taxes. Because having $100k and $50k in the bank
could be very different living situations.

~~~
charlesdm
This is just incorrect. There are generally two types of people; some hate
taxes, and the higher the gain the bigger the incentive is to move abroad
(this generally does not apply to Americans, as they are taxed globally). And
then you have people who don't care and would pay the tax either way --
whether it's set at 10% or 35%.

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soneca
I think the "Bitcoin billionaire" is more of mythical figure than real people.

To be a Bitcoin billionaire, even a multimillionaire you had not only buy
thousands of Bitcoin early on, you had to also:

\- Hold when it was valued at USD10 (it was a milestone that generated a lot
of buzz that it was a peak value)

\- Hold when it was valued at USD100 (it was a milestone that generated a lot
of buzz that it was a peak value)

\- Hold when it was valued at USD1000 (it was a milestone that generated a lot
of buzz that it was a peak value)

\- Not lost the password of a negleticble amount of money stored as virtual
currency that no one quite understood in a virtual wallet you are not sure
where to keep.

\- Not be hacked in several ways, included in the biggest exchange of the
early days

Is anyone guess how many people are left after all that. My guess is that I
would count in one hand

~~~
pwinnski
I got bit by your #4 scenario, and I know I'm not the only one!

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bradleyjg
As the link in the post says, there is an exit tax in place to prevent just
this. One of the qualifying prongs to be subject to the tax is "Individuals
with a net worth of US$2 million or more as of the expatriation date." That's
not liquid net worth, or realized net worth, it's just plain old net worth. If
you are subject to the tax, all your assets are deemed sold as of the date of
expatriation as income tax on the phantom gains are owed.

Of course someone could hope to stay off the radar or move to a non-
extradition country and try to thumb their nose at the USG, but there's a big
difference between a loophole existing and the fact that enforcement isn't
always perfect.

~~~
posterboy
This is illusionary, as billions worth of bitcoin couldn't be cashed out at
once. How do they take the potential for crash into account. Also, is
intellectual property also taxed, like all the mssing

~~~
bradleyjg
This tax provision is not designed to be friendly. It's designed to deter what
the US considers bad behavior. You can disagree that it's bad behavior, you
can call the law is unfair, immoral, unreasonable, illogical -- whatever.
Arguing against those positions is not the point of the post I made.

My point was to point out that there isn't any loophole in U.S. that would
allow a cryto billionaire to avoid capital gains taxes via the expedient of
renouncing citizenship. People can try anyway and see what happens, but
there's a non-zero risk that they'll be chased to the ends of the earth by the
IRS and DOJ.

~~~
posterboy
Well, at least they can't come later and claim the price increased twofold in
the meantime.

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ynniv
Does there need to be even more documentation of tax avoidance and money
laundering schemes for us to realize that no one is going to renounce their
citizenship over taxes?

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jacques_chester
It will depend on what the IRS considers to be the capital gain event.

Also, this:

> _His or her wealth is on a Post-It and nobody else knows about it. So the
> person who was clever enough to buy bitcoin in 2010 renounces in 2018,
> becomes a citizen of a country without income tax or one that doesn’t tax
> foreign holdings, and then starts cashing in without the U.S. government
> ever becoming aware._

Is pretty much a description of tax evasion. Crimes don't get canceled when
you renounce citizenship. And the evidence of this crime is public and
immutable.

If you're in this position, congratulations! Now just suck it up and pay the
capital gains, since 80% of Lots Of Money is better than 0% of Lots Of Money.
Life as a free-and-clear gazillionaire is going to be better than life as a
fugitive from a powerful, spiteful tax agency.

~~~
appleflaxen
I am not a lawyer; I have no idea what the tax law says.

But if the tax law says the gain event is selling the asset, then there is
absolutely nothing morally wrong with exploiting this tax loophole.

It's a travesty that it exists in the first place (as it was when Apple
exploits Irish law), but the laws are written by the government that no
individual can control. If the laws create a loophole, it's legal (obviously)
and ethical to step through it.

~~~
jacques_chester
We're talking about deliberately hiding wealth to avoid taxation. This is
hardly loophole territory.

I'm Australian. I've lived in the US long enough now that I am treated as a US
tax resident -- worldwide income, foreign assets, the whole shebang. I have to
report _and pay capital gains tax_ on my compulsory retirement savings in
Australia, which I cannot transfer here or withdraw, because of an oversight
in the US-Australia tax treaty.

Yes, it's absurd. But even in the matter of a few hundred bucks it is not
worth messing with the IRS. There is too much to lose.

You have to pick your battles. Trying to sneak past capital gains tax
illegally is bitpenny wise and pound foolish. If you don't like the tax laws,
do what everyone else has to do and get elbow-deep into the messy,
uncomfortable and morally challenging world of representative democracy.

~~~
aceon48
Actually as part of tax reform, US is moving to territorial system instead of
world. It's probably the single biggest improvement and fix to come out of
that bill.

~~~
jacques_chester
That _is_ an improvement, I missed it in the hubbub about tax rates. But I
expect it means I still have to report for the last tax year.

Either way, I'll report and pay whatever my agent says is correct.

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cylinder
You have to not only acquire a visa to reside in a low tax jurisdiction but
you also have to obtain citizenship in it first. You can't become stateless.

~~~
eaandkw2
I’m not saying you are wrong, but something really annoys me when I here you
can’t become stateless. It's like saying you can’t not have an owner.

~~~
mikekchar
Being stateless means that you are not allowed to reside anywhere without
permission. While there are some drawbacks to having citizenship (depending on
the country), there are no countries where it is worth your while to withdraw
citizenship without having another to fall back on. All of the legal rights
that most people take for granted disappear when you are not a citizen. And if
you are arrested for any reason (or even no reason), nobody will come to your
aide if you are stateless.

Having lived a good percentage of my adult life in countries where I do not
have citizenship, it's something that I keep in mind -- I do not have the
rights of a citizen. I only live here as a guest on the good graces of my
host. Only international agreements with the country that I come from
guarantees any due process of law in the case that there is trouble.

Having said that, I completely agree with you: it would be wonderful if
countries would guarantee rights of people no matter their origin or political
affiliations. We don't live in that kind of world, unfortunately.

~~~
eaandkw2
I totally understand. It actually sounds a lot better when you say "you are
not allowed to reside anywhere without permission."

It would be nice to be able to travel around the world without restrictions.

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shlant
our plan is the MM2H Visa:
[http://www.mm2h.gov.my/index.php/en/](http://www.mm2h.gov.my/index.php/en/)

It requires a large initial deposit and proof of funds, but all foreign-
sourced income is tax free.

Malaysia is very centrally located in SEA, has great weather year round, very
modern, great food.

~~~
pentae
I was considering it a few years back myself, but then I went and spent some
time in Malaysia and couldn't fall in love with it. I ended up in Thailand and
much prefer it here. I recommend spending some time in Malaysia before you
take up the MM2H program.

~~~
shlant
We actually did Thailand first and are just about to leave Chiang Mai after
spending a total of 2 years here. We have been to KL twice and Penang twice.
We will be spending a couple months in Penang this summer and then a few
months in Kuching to narrow down where we want to settle. So far have not
found any deal breakers, and the Durian/fruit situation makes it VERY
enticing.

Chiang Mai was top of the list for a while (we have done most of the rest of
Thailand), but considering the Thai Elite Visa does not give good ROI and
burning season makes the North awful for 3-4 months of the year, Thailand is
no longer a top pick. Also we have kind of outgrown it at this point.

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everdev
Are there still Bitcoin billionaires after the 50%+ drop?

