News / USA

Expatriation of Facebook Co-founder Draws Ire

Two workers inside of Facebook headquarters in Menlo Park, CalifTwo workers inside of Facebook headquarters in Menlo Park, Calif
x
Two workers inside of Facebook headquarters in Menlo Park, Calif
Two workers inside of Facebook headquarters in Menlo Park, Calif

Facebook co-founder Eduardo Saverin, who is set to earn billions when the social networking giant goes public on the U.S. stock market Friday, has drawn criticism for renouncing his U.S. citizenship in a move that could save him millions in taxes. The Singapore resident still will end up paying fees, but experts say the benefits of expatriation for Saverin, and many others, may outweigh the costs.


Saverin’s stake in the company is estimated at nearly $4 billion. As a U.S. citizen, he would have been subject to a capital gains tax of about 15 percent, or $600 million.


By giving up his U.S. passport, he’ll avoid that fee, but that doesn’t mean he won’t pay any taxes in what will be the biggest initial public offering of an Internet company in history.

Saverin, and every other income earner who renounces their U.S. citizenship, is subject to an exit tax on all of the assets he owned before expatriating. Just how much he’ll pay is up for debate, according to Michael Graetz, a tax professor at Columbia University in New York.

“The question is when his renunciation of citizenship is effective, and what was the value of that stock at that time. He renounced his citizenship in September, and so he’ll claim that the value was significantly less than the value of the stock on the open market because he had such a large block of stock that he couldn’t have sold it privately,” Graetz explained.

Saverin likely will battle out the valuation of his stock with the U.S. Internal Revenue Service. That court battle apparently is worth it to Saverin in the long-run. His spokesman, Tom Goodman, says the billionaire has found it more “practical” to become a resident of Singapore, which doesn’t have a capital gains tax.

Goodman said the move to Singapore was not to avoid taxes.

“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,” he said in a press statement.

The countries where those companies are based could charge some withholding taxes, but Saverin is not obligated to pay taxes to Singapore for income earned overseas. The Brazilian-born businessman won’t be paying taxes in his home country, either. The United States is the only major economy that taxes its citizens, wherever they are in the world, not just its residents - a practice that began to raise money during the American Civil War of the 19th century.

Saverin’s story, now made infamous by the Oscar-winning film The Social Network, is the stuff of American dreams. The son of a wealthy Brazilian businessman, he moved to the United States as a child to escape the threat of being kidnapped for ransom. Saverin became a U.S. citizen, and attended Harvard University, where he and Facebook co-founder Mark Zuckerberg hammered out plans for what would become the most popular social networking site in the world.

A falling out with Zuckerberg lead to his removal from Facebook in 2005, which sparked a major legal battle that resulted in him owning about four-percent of the company.

His decision to leave the U.S. has stirred ire from critics like tech blogger David Gewirtz, who slammed Saverin for how he “played the system.”

“Going so far as to renounce the incredible gift of citizenship we gave to this man, and by doing so, saved him from kidnap gangs in his native country, that’s below reprehensible,” he wrote on his blog, ZDNet Government. “Justice would be to take away his stock benefits if he renounces his citizenship. Justice would be to block him from raking in all that cash if he’s not willing to pay his fair share.”

Saverin’s move is not against the law. He is committing tax avoidance, not tax evasion, according to Reuven Avi-Yonah, the director of the University of Michigan’s International Tax Program.

“It’s clearly legal. Congress passed this law in 2008, that said that if you are a U.S. citizen living overseas, you are permitted to relinquish your citizenship and pay an exit tax,” he said.

Before there was an exit tax, Avi-Yonah says expatriates had a prolonged financial commitment to the U.S.

“You had to continue to pay taxes if you were a U.S. citizen for 10 years, unless you could prove to the U.S. that the reason you expatriated was not because of taxes. And low and behold, everybody was able to prove that they expatriated not because of taxes but for some other reason,” he said.

Avi-Yonah says before the law was passed, people felt it was unpatriotic to renounce, but now it’s just a matter of calculating the price.

“Congress put a price on it, and if the price is good enough, then you pay the price,” he said.

Saverin is among 1,780 people who renounced their U.S. citizenship in 2011, a massive jump from the 235 who expatriated in 2008, according to the U.S. Department of Treasury.

Whether that number climbs, Avi-Yonah says, is not just a matter of money. Living in the U.S. is pretty desirable, he says, and even those who want to live outside the country still value a U.S. passport.

It’s a connection you can’t get online.

You May Like

Multimedia Obama Defends Immigration Action

Obama says with his executive action on immigration, enforcement resources will be focused on 'felons, not families; criminals, not children' More

US-Led Airstrikes in Syria Kill Over 900: Monitoring Group

British-based Syrian Observatory for Human Rights says the toll includes more than 50 civilians, five of them women and eight of them children More

Report: Obama Broadens US Combat Role in Afghanistan

The New York Times says resident Barack Obama has signed a classified order extending the role of US troops in Afghanistan for another year More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
New Skateboard Defies Gravityi
X
November 21, 2014 5:07 AM
A futuristic dream only a couple of decades ago, the hoverboard – a skateboard that floats above the ground - has finally been made possible. While still not ready for mass production, it promises to become a cool mode of transport... at least over some surfaces. VOA’s George Putic reports.
Video

Video New Skateboard Defies Gravity

A futuristic dream only a couple of decades ago, the hoverboard – a skateboard that floats above the ground - has finally been made possible. While still not ready for mass production, it promises to become a cool mode of transport... at least over some surfaces. VOA’s George Putic reports.
Video

Video Falling Gas Prices Impact US Oil Extraction

With the price of oil now less than $80 a barrel, motorists throughout the United States are benefiting from gas prices below $3 a gallon. But as VOA’s Kane Farabaugh reports, the decreasing price of petroleum has a downside for the hydraulic fracturing industry in the United States.
Video

Video Tensions Build on Korean Peninsula Amid Military Drills

It has been another tense week on the Korean peninsula as Pyongyang threatened to again test nuclear weapons while the U.S. and South Korean forces held joint military exercises in a show of force. VOA’s Brian Padden reports from the Kunsan Air Base in South Korea.
Video

Video Mama Sarah Obama Honored at UN Women’s Entrepreneurship Day

President Barack Obama's step-grandmother is in the United States to raise money to build a $12 million school and hospital center in Kogelo, Kenya, the birthplace of the president's father, Barack Obama, Sr. She was honored for her decades of work to aid poor Kenyans at a Women's Entrepreneurship Day at the United Nations.
Video

Video Gay Evangelicals Argue That Bible Does Not Condemn Homosexuality

More than 30 U.S. states now recognize same-sex marriages, and an increasing number of mainline American churches are blessing them. But evangelical church members- which account for around 30 percent of the U.S. adult population - believe the Bible unequivocally condemns homosexuality. VOA's Jerome Socolovsky reports that gay, lesbian, bisexual and transgender evangelicals are coming out. Backed by a prominent evangelical scholar, they argue that the traditional reading of the bible is wrong.
Video

Video Ebola Economic Toll Stirs W. Africa Food Security Concerns

The World Bank said Wednesday that it expects the economic impact of the Ebola outbreak on the sub-Saharan economy to cost somewhere betweenf $3 billion to $4 billion - well below a previously-outlined worst-case scenario of $32 billion. Some economists, however, paint a gloomier picture - warning that the disruption to regional markets and trading is considerable. Henry Ridgwell reports from London.
Video

Video Mexico Protests Escalate Over Disappearances

Protests in Mexico over 43 students missing since September continue to escalate, reflecting growing anger among Mexicans about a political system they view as corrupt, and increasingly tainted by the drug trade. Mounting outrage over the disappearances is now focused on the government of President Enrique Pena Nieto, accused of not doing enough to end insecurity in the country. More from VOA's Victoria Macchi.
Video

Video US Senate Votes Down Controversial Oil Pipeline - For Now

The U.S. Senate has rejected construction of a controversial pipeline to transport Canadian oil to American refineries. The $5 billion project still could be approved next year, but it faces a possible veto by President Barack Obama. As VOA’s Michael Bowman reports, the pipeline has exposed deep divisions in Congress about America’s energy future.
Video

Video Can Minsk Cease-fire Agreement Hold?

Growing tensions between government troops and separatists in eastern Ukraine further threaten a cease-fire agreement reached two months ago in the Belarusian capital of Minsk. Critics of U.S. policy in Ukraine say it is time the Obama administration gives up on that much-violated cease-fire and moves toward a new deal with Russia. VOA's Scott Stearns has more.
Video

Video Chaos, Abuse Defy Solution in Libya

The political and security crisis in Libya is deepening, with competing governments and, according to Amnesty International, widespread human rights violations committed with impunity. VOA’s Al Pessin reports from London.
Video

Video US Hosts Record 866,000 Foreign Students

Close to 900,000 international students are studying at American universities and colleges, more than ever before. About half of them come from Asia, mostly China. The United States hosts more foreign students than any other country in the world, and its foreign student population is steadily growing. Zlatica Hoke reports.
Video

Video Ferguson Church Grapples with Race Relations

Many white residents of Ferguson, Missouri, say they chose to live there because of the American Midwest community's diversity. So, they were shocked when a white police officer killed an unarmed black teenager in August – and shaken by the resulting protests and violence. Some local churches are leading conversations on how to go forward. VOA’s Ayesha Tanzeem reports.

All About America

AppleAndroid