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.
You can live in Singapore, visit Monaco for a weekend, then quickly fly back. You can have a team of lawyers and servants on hand. Planning and advising what citizenships to gain and which ones to lose. I think this was just one advice he received and he let them set it up for him.
With that much wealth, taxes all of the sudden are handled differently. The money you can pay a team of tax lawyers and accountants to offshore it, and protect it, is a drop in the bucket, compared to the tax you'd pay. You'd be a fool not to do it.
But year, at first, as someone who also jumped through years of red tape to gain citizenship, this is baffling, but you have to realize these individuals live in a different world, by different rules.
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.
He may have sold some stock to private investors but I don't think that's what you meant.
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.
>> 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.
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.
He's making this move before Facebook is public.
Once Facebook is public, the value of his stake is much more transparent (and harder to fool around with). In your first example, the valuation of a privately-held company determines the exit tax. In your second example, Facebook is a public company and its valuation is determined by a public market. Singapore has no capital gains tax, so if he exits now with the lower private company valuation, he won't pay taxes on the difference.
"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"
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.
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.
Given the situation, I don't see why he would keep American citizenship.
I hate to sound like a populist, but for goodness sake some perspective is necessary.
Spending is just deferred taxation, and spending keeps going up. Yes, after adjusting for population and inflation: http://www.usgovernmentspending.com/spending_chart_1970_2017...
It peaked at 94% during WW2, but even absent of any wars, it was significantly higher than it is now (35%).
It was even worse once you work out how much more progressive our tax is now than it used to be. In 1982, you were paying 50% federal tax on all income above $106K (about $200K in today's dollars). Now the top tax rate doesn't even kick in until after $388K.
People today are paying historically low tax rates mostly because of the Republican's cynical attempt to "starve the beast" in order to reduce spending - which I might add is entirely backwards as it gives everyone what they want and no one feels any pain. If they really wanted to reduce spending, they'd force tax raises so everyone felt the consequences of every new government program.
(Obviously, the above is too simplistic to actually rely upon, but that's how corporate taxes reduce investor returns, effectively resulting in double taxation in many people's mind, including my own. I still believe that's part of the reason LTCG are and should be taxed at a lower rate than ordinary income.)
Saverin's paying 15%. Sounds like the goal is met.
I'm not by any stretch of the imagination against people making money, but you have an obligation to pay it forward to the society that enabled you to do it. Defending this sort of behavior smacks of the wealth-worshipper disease and there's not a lot worse than that.
What would be satisfactory? That he paid based on the ipo price? What the stock is worth at the end of ipo day (likely inflated)? What it's worth a year from now? 5 years? 10 years? What would be fair?
If I understand the situation correctly. He is basically going to be allowed to pay capital gains on $X after selling for something like $10X, making his rate more like 1.5%.
If you want to continue the discussion, do you think you could try to do without the personal attacks? They're very irritating and completely uncalled for here.
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.
For this opportunity we should give back as much as we can.
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.