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: