
Renouncing citizenship: Did Eduardo Saverin do anything wrong? - antonellis
http://www.economist.com/blogs/democracyinamerica/2012/05/renouncing-citizenship?fsrc=scn/tw/te/bl/dideduardosaverindoanythingwrong
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zmitri
I don't think he did anything wrong... but, personally, as an immigrant in the
United States it's tough to swallow.

I'm currently in H-1B status and work for a top tier hedge fund. I recently
resigned because I decided it was time to go full on with my own company, and
even though I have lived here for 2 years, paid my share of taxes, and have
enough saved up to support myself for at least 1.5 to 2 years, if I don't
succeed/raise money to sponsor my own H1B in the next few months (or take a
new job) there's a chance I will have to go home.

Oh, and even getting a chance at getting those few months, is dependent on the
USCIS approving my change in status from a specialist worker to a "tourist."

There's just so little room for error as an immigrant, but the fact that you
can make lots of mistakes is one of the things that makes the US so awesome
for gutsy Americans.

Immigration is a messed up thing and it's just sad to see someone throw a
citizenship away that so many people would fight like crazy for. I doubt he
would have gotten that first chance to make it big anywhere else.

~~~
romeodelight
Singapore doesn’t have a capital gains tax.

At 15% long-term capital gains tax rate on $3.84B (4% of Facebook),

He saved $576 Million by giving up his citizenship and moving to Singapore.

~~~
rudiger
Not exactly. He's paying some tax now, while Facebook is still private. It's
just that once it's public, the value of his stake will be much more
transparent and so he'll have to pay more taxes.

~~~
romeodelight
Only realized capital gains are taxed. The capital gain is not realized until
the stock is sold. So the answer is no, he's not paying "some" taxes now on
his fb shares.

He may have sold some stock to private investors but I don't think that's what
you meant.

~~~
waterlesscloud
He's actually paying as if he sold it all at the time his citizenship was
revoked. It's the "exit tax" all the stories on this mention.

~~~
romeodelight
Thanks for the clarification.

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kika
I wonder what Eduardo could have done wrong. He came to the US as a wealthy
man, paid for the education, invested his money into stock trading then
invested his proceeds into some flimsy venture written in PHP and created
thousands of jobs and billions of wealth for risky investors. Now he's heading
for the exit and going to buy an exit ticket worth half a billion dollars.
Instead of creating some obscure umbrella corporation in some shady overseas
jurisdiction, "sell" his shares to it and do not pay a dime. And now they call
him having no respect and appreciation for his foster country. I'll never
manage to understand these commies.

~~~
rdtsc
I would guess a lot of it is envy disguised as patriotism.

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jonshea
By my math, Eduardo Saverin doesn’t avoid any tax at all by leaving the US,
regardless of whether or not his stock goes up or down. If he leaves, the US
takes 15% of his stock now. If he stays, the US takes 15% of his stock later.
But either way, the US have taken away 15% of his ability to spend.

Let’s work through it with numbers, in case that isn’t clear. Say Saverin has
$100 worth of Facebook stock. He renounces US citizenship. He sells enough
stock to pay $15 to the government, leaving him with $85 in Facebook stock.
Over the next year, Facebook doubles in value, leaving him with $170 in stock.
He cashes out, and there’s no tax, so he ends up with $170 in cash.

Now imagine he stays in the US. He has $100 in Facebook stock, which he pays
no tax on because there is no taxable event. Facebook doubles in value over
the next year, so he ends up with $200 in stock. Then he cashes out, paying
15% in capital gains, leaving him with $170 cash.

Clearly he ends up with the same amount of cash either way. Perhaps Saverin is
avoiding tax by leaving the US, but neither this article nor any other article
I have read identifies how he is doing so.

~~~
seats
See this comment below. Also you could make the case that you are locking in
the 15% LT cap gains rate, which could and likely will increase at some
unknown point in the future.

>> The numbers on and analysis of his tax liability in the article are
demonstrably wrong - at a level of error unworthy of The Economist. His tax
liability is calculated on the value of the stock as of the date he renounces
citizenship, which was last September. Today, Facebook is worth maybe $100
billion. Early this year, a private equity offering put the value at $50
billion. Last fall, who knows, and it's all subject to negotiation with the
IRS - my guess is no more than $25 billion. That means he evades 75 % of the
tax bite by renouncing citizenship, and will be paying at most maybe $125 to
$150 million of that $500 to $600 million tax liability he would owe if he
sold all his stock next week.

~~~
jonshea
If we assume that Saverin had to pay his taxes by selling shares at the same
price at which the IRS assessed then, then my logic still holds. Saverin would
have to sell 15% of his stock to pay the 15% tax.

If, as you suggest, he is able to sell his shares at a greater valuation than
the IRS uses to calculate his exit tax, then you are correct. When you
renounce your citizenship, I have no idea how long the IRS gives you to
actually pony up the exit tax.

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patrickgzill
Thomas Jefferson:

"Our ancestors... possessed a right, which nature has given to all men, of
departing from the country in which chance, not choice, has placed them, of
going in quest of new habitations, and of there establishing new societies,
under such laws and regulations as, to them, shall seem most likely to promote
public happiness"

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kinkora
It seems people have missed the article where Eduardo explains why he
renounced his citizenship:-

<http://news.ycombinator.com/item?id=3972209>

~~~
pasbesoin
I'm not in a position to evaluate this, but I have seen other reporting to the
effect that U.S. citizens are facing increasing challenges in investing
abroad, in as much as foreign entities don't want the complications in
reporting (and attendant risk) mandated by the U.S. government and its IRS.
(Which is the main point in the parent's linked thread that posts a WSJ
article).

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Alienz
As long as he didn't broken any law, and he didn't regret what he did, why
someone would say he did anything wrong?

You may think, he earn his money in the US soil and he should contribute back
to the US people. Morally correct. However, if that means he have to fund the
US government by paying tax and portion of that money eventually used for
launching a war in the middle east, I also think legally avoiding tax to the
government is morally correct.

~~~
Drbble
Taxes don't fund war. Borrowing funds war.

~~~
sokoloff
Taxes are the basis for repayment upon which those funds are lent to the
government. It's like saying the median house isn't bought with income, but
rather with a mortgage. Generally true, but try getting a mortgage without any
income (now).

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pwim
There are only two countries in the world that tax non-residents: America and
Eritrea.

[http://renunciationguide.com/Citizenship-Based-Taxation-
Inte...](http://renunciationguide.com/Citizenship-Based-Taxation-
International-Comparison.html)

As there is no representative for American citizens abroad (they can vote in
Federal elections, but the district is based on place of last residence), this
is essentially taxation without representation.

Saverin has lived in Singapore since 2009. He renounced his citizenship in
2011. <http://en.wikipedia.org/wiki/Eduardo_Saverin>

Given the situation, I don't see why he would keep American citizenship.

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davidbanham
The big idea here is that no other country in the world handles taxes in this
way. As far as I'm aware, no other country is as aggressive as the US in
taxing income earned by it's citizens while working overseas.

~~~
spullara
He "earned" the money in the US and only our deferred tax model on stocks
allowed him to extract the value much later. I wonder if we will ever just tax
the actual options, shares or RSUs by number rather than by their dollar
value.

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newbie12
Saverin's exit is a warning sign, a symptom of a growing sickness in America.
All of the envious, hateful attacks on the "top 1%" and the likely prospect of
punitive new taxes to support our out-of-control entitlement state make
entrepreneurs like Saverin a target, and he knows it.

~~~
Aloisius
Yes, the out of control entitlement state which collects... significantly less
taxes than most of the 20th century.

I hate to sound like a populist, but for goodness sake some perspective is
necessary.

~~~
dantheman
There's a difference between tax rate and effective tax rate; the high taxes
of yore were never really paid by anyone with money.

~~~
eli
Prett sure the effective tax rate is declining as well...

~~~
romeodelight
The average effective corporate tax rates last year was 12.1%

------
earbitscom
If American infrastructure invented Facebook then American infrastructure
would have invented Facebook.

~~~
bermanoid
Actually it did, and it was called the Harvard Connection, but a scam artist
of a contractor thought it was a good idea and lead the founders on as if he
was putting the finishing touches on the site to delay their launch and them
settled that crime for pennies on the dollar, and here we are.

How complicit Saverin was in this crime is questionable, but it's clear that
Zuckerberg knew exactly who he was "fucking" (his words) and how from his IMs.

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salimmadjd
I'm an immigrant myself and I owe everything I have to USA! There is almost no
other country in the world, where an immigrant can make as much impact as a
native person can.

For this opportunity we should give back as much as we can.

~~~
hnwh
And are you still paying taxes on your American income to you r home country?
B/c that's how tax laws work for the US. If you really believe what you're
saying, send 30% of your income to your home country, just because you're
loyal like that. Also stop taking deductions from your American taxes, just so
you can help out the govt. And if ever you decide to move back to your
original country but keep your US citizenship/green card, don't forget to send
30% of your foreign income to the US every year for the rest of your life.
Because you owe everything to the US, right? Thanks

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jebblue
Legally or morally? Legally, I'm not a lawyer but I would guess not. Morally,
he has to live with the decision he made oh and legally too since renouncing
US citizenship is permanent (as far as I can understand the government site I
read).

~~~
sdm
Since when has not being an American citizen made you immoral?

~~~
jebblue
I was referring to the tax question at the heart of the debate. I'm not the
most articulate person, perhaps moral is not the best or most appropriate word
but it doesn't feel that far off.

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tomjen3
Of course not.

And I don't want to hear complaints from people who haven't paid at least 500
million in taxes.

He has done much more for the us than has most people on welfare. They
certainly haven't paid their fair share.

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bradleyjg
I'm not saying he did anything wrong, but it is a bit of a slap in the face. I
think the US should have a policy of not admitting renouncers to the country
under any status.

~~~
hnwh
what happened to "land of the free", as in freedome to decide where you live
and your citizenship?

~~~
bradleyjg
No one can stop you from renouncing your citizenship, but if you do you are
are an alien. Ask some aliens how easy it is to get a visa to the US. If you
voluntarily put yourself in that category at very least you should be at the
back of the line.

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maercsrats
Fuck'em. It was a dick move given all the opportunities he got in this
country. I prefer rich people more like this:
[http://www.thedailybeast.com/articles/2012/04/30/stephen-
kin...](http://www.thedailybeast.com/articles/2012/04/30/stephen-king-tax-me-
for-f-s-sake.html)

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Coswyn
Ethically, yes. Legally, no.

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rsanchez1
Objectively, he didn't do anything illegal. He just wants a bigger chunk of
his cash. The problem people have is that the cash is going to a "1%"er,
instead of lining the pockets of career politicians in Washingon, er, I mean
paying for the health care of the poor.

