My knee-jerk reaction is: What an ass. He comes here, gets an education, co-founds a company, and gets rich from it. And yes, he's spending money and creating jobs -- but he's also benefiting from the infrastructure, the business climate, the population, and more. And when it comes time to pay his tax bill, he skips out. Not cool.
service rendered and paid for, he doesn't owe you anything, wtf do you want?!
> he's also benefiting from the infrastructure, the business climate, the population, and more
i don't know his story, but if he grew up in the US, his parents probably worked there and paid taxes like everyone else that paid for those things.
also, there are other countries that have that kind of infrastructure, business climate, etc. give or take a bit of quality here and there. some of them have less regulatory capture, thus are both more effective and more efficient, and thus can provide equal or better services for less taxes.
it's completely legal to leave for greener pastures if you can, that's why freedom is a good thing. your faux moral argument smacks of either envy or socialism, can't quite decide which.
listen, the state doesn't have a "moral right" on your money, energy, or time. first, you're born somewhere but then you basically make a deal. most people enter this deal implicitly, but it's still a deal, it's got nothing to do with morality or ethics.
The state gives you the "moral right" to your property by protecting it from others using violence. There's no such thing as private property without the state. That was my argument. I'm not taking a position on whether Saverin should've retained his citizenship and paid taxes or not.
Except the state doesn't actually protect, they only enforce consequences after the fact. If someone wants to destroy your property, the state is powerless, and the aggressor will more likely than not be successful, depending on their and your level of savvy.
I know this sounds incredibly pedantic, but feel it's important to make the clarification.
It's legal to give up your citizenship - he plans to live in Singapore and he must still pay the exit tax. This is what the law says and he doesn't break it.
If you want to discuss this emotionally, try to see his point of view as well: US is the only nation in the world (ok, maybe with 1-2 other exceptions from Africa) where residency doesn't determine the tax authority you're subject to. He plans to live and have his residency in Singapore and pay taxes there but US would still like to have his tax money, who's the ass?
Yeah, fair enough, it's legal and I'm sure he has the legal representation to abide by the letter of the law.
That said... if I wanted to present a highly sympathetic portrait of someone renouncing US citizenship because of the unusual policy of taxing citizens overseas, this isn't the case I'd pick.
I believe that Saverin benefitted tremendously from being in the US, as a US citizen, and that his earnings (ie., proceeds from the IPO) are a direct result of having been in the US for this time. When you work at a startup, you are essentially working for the prospect of future earnings (in a way, it's a form of deferred earnings, except of course it's highly unpredictable). He has found a clever way to be a US citizen while his earnings are unrealized, but not a US citizen once they are.
This is very different from the case where a person earning a salary in the US moves overseas and lives and earns a salary as a resident of a different country.
By the way, I've never read a real defense of the unusual policy of taxing US citizens who live abroad, and I am a little worried I'm overlooking something here. Does anyone know what the justification for this is? Or why it's justifiable for the US but not (essentially) every other country?
Just google "US Citizen Freed" and you will find countless examples of US Gov intervention and protection that simply cannot be bought.
He is now a much, much better kidnapping target since he is one of just a few non US citizens with over a Billion dollars who has no real protection. Do you think Singapore can protect him? His lawyer just made a huge fee and looks smart but gave up his clients relatively inexpensive protection.
True. But do you consider those extra billions to be money he didn't earn in the United States? In this case, it does seem like the US is going after income that was properly earned in the US, it's just that with startups (and IPOs), you can cleverly renounce your citizenship in between the time the work is done and the money is realized.
I see this as different from someone going over to England, working, opening an account, making investments, and discovering that they owe (or at least have to file) with the US.
Americans living in Denmark don't seem to worry too much about US tax. This is due to the insane taxation level we have here, which blows all other levels out of the water and makes calculating US tax very easy.
He did pay taxes on what he earned while there and contributed to your society. The company he co-founded created lots of jobs and helped the economy tremendously. The problem is that even if you aren't a resident being a citizen of the US has negative tax implications that are only seen in 2 or 3 countries in the world. If you plan to live overseas indefinitely its smart to get rid of your US citizenship.
When the United States stops spending its tax revenue bombing third world countries, maybe then you'd have a moral argument. Till then it's the duty of all right thinking people to minimize their collaboration with the federal government.
This was more or less Thoreau's argument in his essay Civil Disobedience (1). He concluded that the US was acting immorally in its war in Mexico and therefore he didn't pay his poll tax. They locked him up overnight, and then his aunt paid his tax and he was let out.
Some people conclude that those who collaborate with the federal government are evil and therefore deserving of arbitrarily bad treatment, and that's what gets you terrorists and violent anarchists and so on. Also, one looks in vain for the government which always behaves ethically and can be relied upon to continue doing so which one ought to be supporting instead.
But then, I remember he's getting nothing for free here. He's giving up his citizenship. Under the current economic/political climate, that may be something that looks easy to do on a whim ("The US is going to lose superpower status! Who cares!"), but this is a big, big thing. You lose all rights to live and work in the US, and can't ever get this back.
So let me get this straight: rich kid at Harvard gives his bright friend some money to rent servers to run a service that gets popular. Rich kid doesn't contribute any more. Rich kid gets cut out of company because he's not doing shit any more, then sues the company. Company sucks it up and pays him off. Then rich kid renounces citizenship and splits for a tax haven with all of that money, completely avoiding contributing anything further to the environment that made him billions of dollars.
And the popular narrative is that Zuckerberg is the asshole? Huh.
You're assuming he is leaving for tax purposes. If he doesn't live in the United States why would he retain his citizenship? He could be denouncing it for entirely unrelated reasons, someone stated below that to get citizenship in Singapore you must be a citizen of only Singapore. Nowhere has it been confirmed, this is all speculation. He hasn't just suddenly "split", he left the US almost 2 years ago. He already paid taxes on hundreds of millions, I really doubt that he hasn't paid his "fair share".
He could simply want to live elsewhere. If you don't live in the US, you wouldn't want to keep paying them taxes for no reason. I see no problem with renouncing his citizenship for tax reasons if those tax reasons are "I don't want to keep paying a country I no longer have ties to".
Taxes probably played a role in the decision, but it could easily have been a minor one rather than just "split[ting] for a tax haven".
Would he also have to pay taxes in Singapore? If so, I can see how this move would be acceptable.
Even if not, I don't think many would find this unacceptable if he had done this before the mention of the IPO. It's possible that he has been considering the move for a while, and hasn't bothered to go through with it until a significant chunk of his income became at risk.
> And the popular narrative is that Zuckerberg is the asshole? Huh.
Not sure what Zuckerberg has to do with this story, so bringing him into the discussion seems like a red herring. Whether Zuckerberg is a good guy is a separate question; maybe Saverin and Zuckerberg are both assholes (or maybe neither).
Let's see, he's 30 so maybe he has 50 years to live. If he got $3.84 billion and got a conservative 5% interest on that my back of the envelope calculation says he could spend $115 million a year for the rest of his life. Now spending $115 mill per year doesn't count buying assets like mansions or fancy art, those are investments. It would be $115 million on apparel or personal employees or the depreciation of cars, yachts and private jets. It would actually be hard to do and take a lot of work to spend it all every year.
If he paid the american taxes, which are 15% for cap gains but let's say he loses a third so he's left with $2.56 billion. He would be able to spend $77 million per year.
A $38 million per year difference seems like a lot of money, but is their any difference between a $115 million a year lifestyle and a $77 million a year lifestyle? In both cases you have more money than you can spend year in and year out. You're really getting diminishing lifestyle returns the more money you make. Maybe at the $115 mill level you'd feel more comfortable buying another private jet or having an extra 100 personal employees to take care of your stuff, but it really wouldn't be that much of a difference. I bet if he had a talk with some older billionaires they would tell him that it's not worth the hassle.
It is a huge difference, however, if you think: I could give that money to the government, without any control over it, or I could donate it to specific charities, or even fund my own charitable organization, and have complete control over how it was used.
I'm not necessarily saying that one is better than the other (private charity might have the potential to be more effective, but is certainly less democratic). But the choice is not merely between private hedonism and government coffers. You can do good with money outside of taxes.
Plus, if it's invested in other companies (as one would assume it will be), then it helps grow those companies, which if successful, will presumably pay taxes themselves. I'm not arguing against capital-gains taxes in general, but the question of where taxes are collected along the chain is purely practical, not moral. If Saverin isn't paying additional taxes now, it's not like that money is disappearing forever.
The reaction of commenters who gleefully explain he may not be able to become a citizen again is pretty amusing. What makes you think he wants to reapply? Billions of people live fulfilling lives without ever stepping foot in the United States.
How many billions and who defines "fulfilling"? Much of the world actually lives in poverty.
It's also kind of a silly point to make when we're talking about a guy who already set foot in the United States. Why did he come to the United States if he was perfectly fulfilled in his home country where he was facing the threat of being kidnapped? I think it's unlikely he'll want to visit again, but it's not like his initial visit was really under what some would consider voluntary circumstances.
Good for him. I fully support higher taxes on the rich, but this notion that the US can tax you anywhere in the world is downright offensive. He hasn't been in the US since the company started, so I have trouble seeing a case for him owing the US anything.
I am not sure anyone noted yet that his Facebook earnings will fall entirely under capital gains income, which only gets taxed at 15% in the United States (http://en.wikipedia.org/wiki/Capital_gains_tax_in_the_United...). Singapore has ZERO capital gain tax, so he may be trying to avoid any tax burden on this income. Still, 15% remain quite low (The go up a bit in 2013.), and I suspect he would not have to pay it until actually selling his shares. Some reports say he has already sold over half his stake, so I am not sure this Singaporean move does that much for him.
There are plenty of ways to shelter money in the United States (http://www.forbes.com/sites/deborahljacobs/2012/03/20/how-fa...) and pay basically nothing. Everyone here likes to make the tax burden on US citizens outside of the US sound so horrendous, but my experience is that it is a worst of taxation situation. One gets to exclude the first 95k of income from US, but I think you also can run money through a housing allowance of around $100k depending on the cost of living.
Yes, the US tax system sucks, but the weather and disney-like atmosphere in Singapore suck more in my opinion. I think I could have fun living there for a few years, but a lifetime would be hard. The US will definitely consider this a move to avoid taxation. He will probably never be welcome again in the US, and essentially becomes a pawn in international extradition should some US administration in the future have a point to prove. If it were me, I would just dump a ton of money behind Ron Paul.
Very good point. In Switzerland, if you have a US passport, it is pretty difficult to open a bank account and/or get financial advice. Apparently bank/advisors can get into trouble for reasons I am not well up to date.
The catch here is: good luck getting back in. The US gov't takes notice of this stuff, and it's just good to be aware of the implications for if you ever want to come back to the US. Not saying it's wrong or right (by all means, the less tax the better), but it's important to be aware of the consequences.
Apparently it depends on if you are deemed to have renounced US Citizenship for tax purposes or for some other lawful reason:
"8 USC § 1182:
(E) Former citizens who renounced citizenship to avoid taxation
Any alien who is a former citizen of the United States who officially renounces United States citizenship and who is determined by the Attorney General to have renounced United States citizenship for the purpose of avoiding taxation by the United States is inadmissible."
Judging from the statement he released, he's certainly aiming for a non-tax reason.
If he did it for tax reasons, it would make a lot more sense for him to do it pre-IPO announcement, or really as early as possible, as the amount of exit tax he's liable for is based on an estimate of the value of his assets. As the article mentions, it's easier to argue that number down when it's a private company.
Trust me, he consulted with many of his lawyers and decided to pursue this strategy. For $1-$2B that he's going to save in taxes, he can hire the world's best lawyers and even petition the government. As a foreign investor in startups, it will be attractive for the U.S. government to let him in order to invest in developing US economy.
I am sure Eduardo will be all set. He will be back in the U.S. and will avoid $1-$2B in taxes.
Hell no. There is a point in time when you cross the line between 'money I can spend in my lifetime' and 'money I can't spend in my lifetime'.
There literally is a point where you can't spend the money fast enough (on objects for personal use) to lose it. You can lose it doing dumb things in financial markets or with a business, but if you have $3 billion dollars it is impossible to spend it fast enough to lose it. You can burn $40 million down to see (see: most musicians and athletes), but not $3 billion.
Even earning 2% interest on 3 Billion (i.e. Treasury bonds or something nearly risk-free), you can make $165,000 A DAY.
So buy 3 cars today, and tomorrow, and the day after that, and the day after that. You just can't do it.
So whats the difference between $2 billion and $3 billion? Not all that much. (And I don't believe he is avoiding a billion dollar tax bill, he still has to pay some level of exit tax).
But the difference between being able to come to the US and not coming to the US is significant. What if he wants to go to a movie premiere in LA, or skiing with friends in Aspen, or going to Warren Buffet's annual investors meeting, or seeing a VC in Silicon Valley? You can shop anywhere, you can vacation anywhere, and you can eat anywhere. But some events only happen in one country or another. Some partnerships only happen in one country or another.
That's obviously assuming the IRS decided he renounced his citizenship for tax reasons and he is banned from the US.
You can always use more money, even if you just plan to donate it all to a particular charity that you like. You can buy politicians, islands, hell you can buy a whole country. After you have your living expenses covered for whatever standard of living you prefer, additional money buys you power.
Isn't tax evasion speculation rather than concrete proof in this case? It seems that it was clearly communicated that the reason for giving up the citizenship was his residency in Singapore for an indefinite time.
If I'm still worth more than a billion, no I would not give up my citizenship. When you're worth more than a billion dollars, as Bill Gates has said, money is of no worry any more. You would have to be an idiot to lose it all.
From a top member of a legal website's forum (so take this with a grain of salt):
"It seems that once you renounced the US citizenship your situation will be like any other who is applying for a Green card for the first time." (this is after quoting some wordy US regulatory docs)
Essentially, yes. A person who renounces U.S. citizenship is generally not able to take advantage of the special visa programs (like the EB5 investor program) to regain residency. Furthermore, their applications for visas, etc., are also (informally) put in the lowest-priority bracket unless they pony up to be placed in the priority queue.
Moreover, any attempt to renounce their renunciation of citizenship results in a hefty tax bill for the period they were not a citizen, as the initial renunciation will be treated (by the IRS) as an attempt to evade taxation.
Indeed, merely returning to the U.S. for a period of more than 183 days (one of the tests for residence for taxation purposes) could trigger this result.
EDIT: Also note, as discussed below, he would be deemed "inadmissible" for re-entry if he was deemed to have a tax avoidance motive for renouncing his citizenship. The consequence would be a permanent ban from the U.S. (and the hefty tax bill would remain intact).
I think you greatly overestimate how much power a billion dollars provides...especially since the IRS would lay claim to that billion if he ever tried to return to the U.S. Why would they work out a deal when they could get their hands on the billion and have an example for future tax evaders?
Note: I use the term tax evader in this context because if Saverin attempts to return to the U.S. in the future (as a resident or citizen), it will be clear that his renunciation of citizenship was primarily for the purpose of evading taxes.
I like hearing about sociopaths that utilize the infrastructure provided by the U.S. but don't want to pay back. Contrast that to the evil poor that utilize the infrastructure, have nothing but are demonized for not paying.
If he'd actually continued to live in the US, I might have sympathy for this argument. But he's moved out. The US tax regime where expat US citizens still have to pay full tax to the US (except where there's a tax treaty that limits double taxation) is exceptionally harsh - almost no other countries do that.
> The US tax regime where expat US citizens still have to pay full tax to the US (except where there's a tax treaty that limits double taxation) is exceptionally harsh - almost no other countries do that.
The US keeps taxing you after you leave. And for citizens, it is for life.
Why do you want citizenship? What do you think it gives you over having the Green Card. When I was going through the process to get my Green Card, my lawyer pretty plainly said that unless I really wanted to vote, getting citizenship gives you nothing but ads many liabilities.
The only real benefit I could have seen for myself was if I lived outside of the US for more than six months of the year from time to time.
I'm not sure which infrastructure you're referring to. Roads? Police? College?
He paid for college. He paid for taxes while he was using the infrastructure you've mentioned. Now he's going to greener pastures and you still expect him to continue to support the U.S. through taxes? I don't think that makes a whole lot of sense. I don't continue to pay college tuition because at some point that "infrastructure" helped me land a job. I paid that debt off, and it's behind me.
I don't want to turn this into a political discussion, but this is why I disagree with people suggesting that the U.S. will fix its problems by increasing the taxes on the rich. The rich will leave- the U.S. doesn't offer anything that other countries in the world can't, and at a cheaper cost.
"sociopaths that utilize the infrastructure provided by the U.S."
given the number of high qualified jobs Facebook has created, the taxes that both FB and employees are paying, and Facebook's continued support towards the startup ecosystem, calling ES a sociopath is simply wrong.
Given the exit tax, am I the only one who sees this as a risky move?
From what I can tell, he's going to have to pay 30% taxes on his unrealized facebook gains. As opposed to 15% long term capital gains. Yeah, it's not publicly traded so they can screw with the valuation, but how will the government take that given liquidity is just around the corner? I'm not an accountant, but this seems like type of scheme that fortunes are lost on. Anyone else more informed have an opinion on the likelihood of him getting screwed over this?
Saverin's case is potentially misleading. Many American citizens living abroad are under great hardship caused by the US tax system following them around the globe. The United States is the only developed country in the world that harasses its citizens for taxes on wages earned in foreign jurisdictions.
E.g.: ""It makes absolutely no sense," said Senator Jim DeMint, Republican of South Carolina, of a system that makes the United States the sole developed country to tax income earned by its citizens abroad."
Guys, there is such as a thing as a US Visa for Foreign Investors:
He'll basically throw half a million at any cash-hungry startup and get a visa in no time, that'll be pocket change for him in few months. Getting back into the US will be no problem this dude. There's always the rafting option from Cuba too :P (I'm going to hell lol).