Facebook Co-Founder Eduardo Saverin Becomes Most Famous American to Renounce His Citizenship Probably for IRS-Compliance Reasons

Alert readers may recall a couple of tax-season bits from me about how the internationally grabby Internal Revenue Service is screwing over Americans, particularly those who lead international lives, leading to an alleged increase in people tearing up their U.S. passports. Now this trend has a poster boy: Facebook co-founder Eduardo Saverin, the Brazilian-born college pal of Mark Zuckerberg who's been based in Singapore for a while. Here's Forbes:

Saverin, 30, may have made the move for tax reasons, hoping to avoid the highest rates before Facebook goes public. […]

Saverin doesn't cite tax reasons for his decision, but rather his investments in general. "Eduardo recently found it to be more practical to become a resident of Singapore since he plans to live there for an indefinite period of time," said Sabrina Strauss, a spokeswoman for Saverin, in a statement provided to Forbes. "He has invested in Asian, U.S. and European companies. He also plans to invest in Brazilian and global companies that have strong interests in entering the Asian markets.  Accordingly, it made the most sense for him to use Singapore as a home base."

MSN Money runs the numbers:

Facebook plans to raise as much as $11.8 billion through the IPO, the biggest in history for an Internet company. Saverin's stake is about 4 percent, according to the website Who Owns Facebook. At the high end of the IPO valuation, that would be worth about $3.84 billion. […]

Singapore doesn't have a capital gains tax. It does tax income earned in that nation, as well as "certain foreign-sourced income," according to a government website on tax policies there. […]

Saverin won't escape all U.S. taxes. Americans who give up their citizenship owe what is effectively an exit tax on the capital gains from their stock holdings, even if they don't sell the shares, said Reuven S. Avi-Yonah, director of the international tax program at the University of Michigan's law school. […]

Renouncing citizenship is an option chosen by increasing numbers of Americans. A record 1,780 gave up their U.S. passports last year compared with 235 in 2008, according to government records.

People will emphasize either the billionaire-evades-taxes angle or the Galt's-Gulch-gets-another, but I can testify as someone who has long had one foot in Europe that the sheer staggering amount of new paperwork required, plus the infuriation of Uncle Sam suspiciously reaching into your legitimate private bidness (in a way that makes it exponentially harder to open up a bank account abroad), that will just as likely keep driving up those citizenship-repudiation numbers.

Another early Facebook type, the libertarian provacateur Peter Thiel, discussed expatriation and the right of exit with reason.tv in 2010:

Comments

[Hugh Akston]

Is there anything about a US citizenship that makes it worth keeping?

They issue national identification numbers Social Security numbers to non-citizen permanent residents. I can't think of anything else that a citizenship is good for.

[Tulpa the White]

They're never going to allow a renouncer to become a resident alien in the US. You probably couldn't even get a visa of any sort. Do keep in mind that you can't renounce while in the US, it has to be done at a foreign consulate.

And have fun trying to own guns in most parts of the world.

[fried wylie]

Do keep in mind that you can't renounce while in the US

That WOULD kinda defeat the purpose, no?

[rts]

As a result of renouncing his [US] citizenship, [Terry] Gilliam is only permitted to spend 30 days per year in the United States, fewer than ordinary British citizens.[61]

http://en.wikipedia.org/wiki/Terry_Gilliam

[robc]

Others have claimed otherwise, that they can still spend plenty of time in the US.

[Tulpa the White]

That's quite a cite you got there.

[Tulpa the White]

He has citizenship in a country with special visa agreements with the US. That's a hard needle to thread.

[Hugh Akston]

Ah, so hang on to your citizenship kiddies, because the government is a bunch of dicks.

No wonder people are so proud of this country.

[Cytotoxic]

The lack of gun freedoms across the world is a serious problem and a serious advantage to America. Here in Canada we have made a few small steps in the right direction, but we need the NRA to lay down some serious groundwork here.

[16th amendment]

I think in times of war you can renounce your US citizenship in the US.

[fish]

Don't hate me for my freedoms!

[Aresen]

Is there anything about a US citizenship that makes it worth keeping?

Yes. For all the United States flaws, it is still better than almost anywhere else.

Don't ever make a Canadian tell you that again.

[Hugh Akston]

I'm not saying move out. I'm saying renounce your citizenship but stay as a resident.

[robc]

You cant.

[Hugh Akston]

Right. Which is lame.

[Tulpa the White]

Maybe you should move to the Terran Federation.

[Tulpa the White]

I suppose you want to get a divorce but still have sex with your ex-wife too.

[Mad Scientist]

Seems only fair since she'll still get to make withdrawals from the ex's bank accounts.

[Gladstone]

Gay Marriage? Porn? Obama is Cool?

[Episiarch]

Don't forget, folks: Uncle Sam owns you. What you can keep of "your" property is up to him, and fuck you if you don't like it.

[tarran]

I recently had an acquaintance ranting about rich people leaving the country to avoid paying taxes.

I pointed out that in the 20th century, three nations had forced people to surrender a large percentage of their property as an exit tax when renouncing their citizenship.

Nazi Germany,
The Soviet Union
The United States.

The cognitive dissonance would be funny if I was a historian living 300 years from now.

[Tulpa the White]

Borrowing tactics from the left, I see?

I remember when the libs were making a big deal about how the only industrialized nations in the world that didn't mandate that employers give maternity/family leave to their employees were the US and apartheid South Africa.

[Episiarch]

You're extra retarded and bitchy today, Professor Pomeranian. Why don't you go all pissy somewhere else, because your shit is tedious as fuck.

[Tulpa the White]

Episiarch.ad_hom()? yawn: surprise;

[Brandon]

"Tulpa the White" implies that you died for a brief period. Can you, like, go back to that?

[Tulpa the White]

I have not passed through fire and shadow to merely trade barbs with a witless worm.

[Cytotoxic]

You're extra retarded and bitchy today, Professor Pomeranian. Why don't you go all pissy somewhere else, because your shit is tedious as fuck.

Today's lesson: self-awareness, and the lack thereof. See also 'Projection'.

[robc]

It seems like a far comparison (the exit tax one). We wouldnt have people giving up their citizenship left and right if we didnt tax foreign income. British expats living in Singapore dont pay taxes to Britain. But they dont have to give up their citizenship.

We are the only major country that taxes expats.

[robc]

s/far/fair/

[Pro Libertate]

We used to not worry about that, because only psycho nutcases left. Now it's not entirely irrational.

[Tulpa the White]

At this rate, assuming immigration immediately stops and never starts again, the US will be completely depopulated in 150,000 years!

Sorry, it IS entirely irrational to worry about this.

[Aresen]

Yeah. A tiny minority of people fleeing your country can't make any difference.

Just ask Albert Einstein, Max Born, Niels Bohr, Enrico Fermi...

[Tulpa the White]

You realize you're comparing the Facebook guys to the discoverers of relativity and quantum mechanics.

You may as well wring your hands about losing all those lottery jackpot winners to other countries.

[Cytotoxic]

That's a mighty fine strawman Tulpa. No one's claiming there'll be depopulation of America. It's that the people who leave have and generate wealth and new ideas for this country. Atlas is shrugging.

[Tulpa the White]

Sounds to me like this guy is just cashing in to live out his life in idle luxury. I'm really not worried about losing him.

Anyway, Facebook is entertainment, not something that produces wealth. It's not like lacking yet another masturbatory media site is going to harm America.

[protefeed]

Anyway, Facebook is entertainment, not something that produces wealth. It's not like lacking yet another masturbatory media site is going to harm America.

So people valuing a service enough to handsomely reward the creators of that service with buttloads of money is not creating wealth?

The economic ignorance is strong with the Tulpa.

[16th amendment]

> Sounds to me like this guy is just
> cashing in to live out his life in
> idle luxury.

Wrong. He's working on investments, holding companies, just like Warren Buffet, George Soros. They are doing something constructive.

On the contrary, it's the government unions that are living life in idle luxury :).

> I'm really not worried about losing
> him.

Well the US is, because they charge an expatriation tax. And for 10 years, capital gains from US stocks are considered US source income (whereas for true non-citizens they are not taxed in the US.)

> Anyway, Facebook is entertainment,
> not something that produces wealth.

It is entertainment, and it does produce wealth. The only gripe I have with Facebook, Google, Bing, etc is that ads are too expensive. Very few click translate into sales (I know from experience) yet you pay $0.50 per click. Ridiculous. If this guy could invest in foreign companies that do advertising for $0.10 per click, that would be great. It would help regular businesses, consumers, and stop a few people from becoming insanely rich.

[protefeed]

At this rate, assuming immigration immediately stops and never starts again, the US will be completely depopulated in 150,000 years!

Sorry, it IS entirely irrational to worry about this.

Ummm, when the people leaving are the tiny majority paying most of the taxes, it is a problem ... for the government.

As an A/C, I'm all for people evading taxes however they can.

[Cytotoxic]

He's also taking that capital with him (the saved billions). And if taxes weren't onerous I wonder if he'd even be cashing out. Yeah Tulpa come back when you're not being stupid okay?

[Tulpa the White]

We wouldnt have people giving up their citizenship left and right if we didnt tax foreign income.

1780 is a bucket drop compared to the number of people becoming US citizens every year, let alone citizens who do not renounce.

Most countries would kill to have the net citizenship gain we have here. The fact that we have people wringing their hands over such numbers is evidence of how attractive a place the US is.

[Anacreon]

Yes, I'm sure all countries would kill to lose a few thousand successful entrepreneurs and replace them with millions of illiterate and impoverished newcomers.

[Drake]

We have a winner.

[Tulpa the White]

This guy wasn't going to do anything productive the rest of his life. Ditto for Zuckerberg.

They just happened to be in the right place at the right time; calling them "successful entrepreneurs" is a joke. (and they stole the idea from other people at Harvard, anyway!)

[Tulpa the White]

Yes, I'm sure all countries would kill to lose a few thousand successful entrepreneurs and replace them with millions of illiterate and impoverished newcomers.

LOL, I guess we see what the REAL libertarians think of immigrants now that the shoe's on the other foot. Even Lonewacko would be sickened by what you just wrote.

[Cytotoxic]

The straws are bloody from your grasping Tulpa.

[Mr Whipple]

I pointed out that in the 20th century, three nations had forced people to surrender a large percentage of their property as an exit tax when renouncing their citizenship.

And in NJ, if you sell your house and move to another state, there's an exit tax. I forget what they call it, but I'm sure it some catchy name that doesn't make it sound so bad.

[Drake]

Only if you already own multiple homes. It's a tax on stupidity since it is so easy to avoid. Just rent a cheap apartment for a couple months and claim to be moving there.

[perlhaqr]

I think this inverts cause and effect. The practice isn't evil because evil countries do it, it's because the evil countries have evil practices like this (and, obviously, others) that they are evil.

[Tulpa the White]

Maybe you should investigate how libertarian a place Singapore is.

Wherever you are, even in ancapotopia, the gang with the biggest guns always owns you to some degree. Unless you're mobile enough to scavenge.

[16th amendment]

My gripe with Singapore is that they've banned chewing gum because some people used it to jam the subway doors.

[fried wylie]

as much as $11.8 billion....Saverin's stake is about 4 percent....that would be worth about $3.84 billion

Is there a special kind of percent or different sort of maths involved in investing?

11.8 * 0.04 = 0.472

so how does 472million turn into 3.84billion? is that just the Magic Of Investing?

disclaimer: yeah, I'm a retarded peon who has never invested in anything ever.

[fried wylie]

ok, are they doing (CurrentValue + IPO) * %Stake? pretty lame to leave values out of the equation that results in their OMG-Billions Scare-Percentage.

[fried wylie]

*facepalm*

clicked through to MSN running the numbers

values the social network at as much as $96 billion

That's the number I was missing.

Great excerpting there.

[fried wylie]

side note: I hit wikipedia for some notion of their value, and in 2010 they were only valued at $41billion. doubled in as many years....wow.

[Pro Libertate]

I'm not pleased with the U.S. in any number of ways, many of them financial, but I'm not up to renouncing citizenship just yet. Singapore, for instance, is far from a liberty-loving option.

[Episiarch]

I imagine that in Singapore, you have plenty of personal liberty if you're a billionaire (just like anywhere), and then you have lower taxes too.

[Pro Libertate]

Oh, is he just building his lair in Singapore? Well, then, that's different. A lair or even just a walled, heavily armed compound is the natural right of billionaires.

[Episiarch]

Of course, there will sharks with frickin' laser beams on their heads too. It should be right next to Hank Scorpio's place.

[Pro Libertate]

You gotta love Hank. His dedication to his employees stands out among evil overlords.

[fried wylie]

*youtubes hammock scene*

[robc]

Marge, you just dont understand football.

[Fist of Etiquette]

His butt's for sitting, not for kissing.

[Mad Scientist]

$3.84 billion will buy at least a couple hollowed out volcanoes.

[Tulpa the White]

Anywhere? Ask Mikhail Khodorkovsky about that.

In that sort of place, you have personal liberty as long as the government finds it useful to have good PR.

[Paul.]

Sort of like here where you have freedom of speech until you use it to criticize the government, then it becomes paid electioneering?

[Tulpa the White]

Are you talking about Singapore? Because that doesn't happen in the US.

[R]

It did before Citizens United.

[Tulpa the White]

I recall a lot of people criticizing the government during the McCain Feingold era.

And of course McCain Feingold applied just as much to govt-friendly political advertising as the critical sort; in fact, the Citizens United case arose from criticism of a Democrat under a Republican administration.

[grrizzly]

But would you pay a billion dollars to keep your US citizenship? When you prefer to live in Singapore. And you were not even born in the US in the first place.

[Pro Libertate]

I was speaking for me.

[protefeed]

I'm not pleased with the U.S. in any number of ways, many of them financial, but I'm not up to renouncing citizenship just yet. Singapore, for instance, is far from a liberty-loving option.

I think you're confusing "the place where you declare citizenship to minimize taxes" with "the many places around the world that you physically visit as you jet-set"

[Paul.]

Saverin, 30, may have made the move for tax reasons, hoping to avoid the highest rates before Facebook goes public. [...]

Obama supporter?

[Paul.]

Renouncing citizenship is an option chosen by increasing numbers of Americans. A record 1,780 gave up their U.S. passports last year compared with 235 in 2008, according to government records.

So the answer is, our 1% become someone else's 1%.

[Brian D]

No problem. The next highest 1% will become the new hated 1%.

sin
Occupy Ignorance

[Carston]

...and team blue thinks that continually raising taxes will increase revenues. Welcome to reality, where the rich (and anyone else of they want to put in the effort) can take their money elsewhere.

Lowering taxes will bring more money into the country, by rich people leaving their current country and doing business here.

[The Derider]

So we had an exodus of rich people from 1933 to 1988 when the rate on the top bracket was 50% or more?

[Cytotoxic]

Yeah the world was exactly the same back then as now. Either bombed out ex-fascists and proxy war between free nations and commies or America with a high tax rate. Gee I wonder why they tolerated the tax rate? Too bad for assholes like you the world is harder and harder to control. Seasteading will make it much worse. You have been derided.

[Tulpa the White]

Seasteading?

You may as well point to the Second Coming and the Easter Bunny as support for your argument. Ain't gonna happen.

[Cytotoxic]

http://www.blueseed.co/

[Hyperion]

Don't blame the guy at all. I have, well, my wife has property and investments in another country. She complains about the taxes there, I complain about the taxes here. All I have to say is that I have never felt more free than I do when I am there, or less free when I am here in the USSA. As soon as I have enough money saved, I cannot wait to renounce and say a big fuck you to this shitty police state. When I look at our cronies in DC, the one thing that I do not think they deserve is more tax dollars to piss down their sink hole or corruption. Honestly, if I could, I would be gone yesterday. Better build that border wall now McCain, you fucking prick, before we all leave. Ron Paul has it right about that wall, all socialist police states need a wall to keep the subjects in.

[Tulpa the White]

What other country are you talking about? Cause unless it's one of a couple out of the 183 other countries, your statements are fairly laughable, since everywhere else is either a high-tax social democracy, a true police state, or a miserably poor shithole. (and even that couple I would disagree with you on)

[Cytotoxic]

Panama is a place for a lot of expats. Is Monico good? I know Switzerland is! The world is not so shitty as you claim Tulpa, and it's getting ever better, but America is still on top just about.

[James Anderson Merritt]

This issue seems like a replay of the great UK "brain drain" of the 60s and 70s. Britain was circling the toilet drain back then, and so, by inference, I suppose we may very well be doing so now.

Really, how venal, stupid, and self-destrictive can our government be? It's time to find the "better guardians," that our Declaration of Independence mentioned.

[16th amendment]

The expatriation tax violates the 16th amendment -- which says government can tax income, from any source derived. Assets are not income. Neither does the other section of the constitution allow the expatriation tax -- as it is not a direct tax. Essentially, the government is forcing a marked-to-market rule on expatriates. It's one thing when citizens elect for the marked-to-market rules (as traders often do). It's also OK to tax inheritance per the 16th amendment, as this is income flowing from the dead person to the beneficiaries. But the expatriation tax is unconstitutional. In addition, if one were to give up citizenship in times of war (as if the US goes to war with country XXX, and you are living in the US but are or were formerly a citizen of XXX), one would be hit with this dreadful tax. It needs to be fought in court. I thin the arguments above would be sufficient to throw it out.

The expatriation tax is just some pet project of one of these democrats, who tried to do it before, but managed to get it into the Heroes Act of 2004 (the year might not be correct). It was a unanimous vote, but Ron Paul declined to vote. I guess voting no would make you look unpatriotic. Just goes to show that no one read the law.