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

Turkey's Erdogan: Women Not Equal to Men

Speaking at conference in Istanbul, President Erdogan says Islam has defined a position for women: motherhood More

Ahead of SAARC Summit, Subdued Expectations

Some regional analysts say distrust between Pakistani, Indian officials has slowed SAARC's progress over the year More

Philippines Leery of Development on Reef Reclamation in S. China Sea

Chinese land reclamation projects in area have been ongoing for years, but new satellite imagery reportedly shows China’s massive construction project More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Aung San Suu Kyi: Myanmar Opposition to Keep Pushing for Constitutional Changei
X
November 24, 2014 10:09 PM
Myanmar opposition leader Aung San Suu Kyi says she and her supporters will continue pushing to amend a constitutional clause that bars her from running for president next year. VOA's Than Lwin Htun reports from the capital Naypyitaw in this report narrated by Colin Lovett.
Video

Video Aung San Suu Kyi: Myanmar Opposition to Keep Pushing for Constitutional Change

Myanmar opposition leader Aung San Suu Kyi says she and her supporters will continue pushing to amend a constitutional clause that bars her from running for president next year. VOA's Than Lwin Htun reports from the capital Naypyitaw in this report narrated by Colin Lovett.
Video

Video Mali Attempts to Shut Down Ebola Transmission Chain

Senegal and Nigeria were able to stop small Ebola outbreaks by closely monitoring those who had contact with the sick person and quickly isolating anyone with symptoms. Mali is now scrambling to do the same. VOA’s Anne Look reports from Mali on what the country is doing to shut down the chain of transmission.
Video

Video Ukraine Marks Anniversary of Deadly 1930s Famine

During a commemoration for millions who died of starvation in Ukraine in the early 1930s, President Petro Poroshenko lashed out at Soviet-era totalitarianism for causing the deaths and accused today’s Russian-backed rebels in the east of using similar tactics. VOA’s Daniel Shearf reports from Kyiv.
Video

Video Hong Kong Protests at a Crossroads

New public opinion polls in Hong Kong indicate declining support for pro-democracy demonstrations after weeks of street protests. VOA’s Bill Ide in Guangzhou and Pros Laput in Hong Kong spoke with protesters and observers about whether demonstrators have been too aggressive in pushing for change.
Video

Video US Immigration Relief Imminent for Mixed-Status Families

Tens of thousands of undocumented immigrants in the Washington, D.C., area may benefit from a controversial presidential order announced this week. It's not a path to citizenship, as some activists hoped. But it will allow more immigrants who arrived as children or who have citizen children, to avoid deportation and work legally. VOA's Victoria Macchi talks with one young man who benefited from an earlier presidential order, and whose parents may now benefit after years of living in fear.
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 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 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.

All About America

AppleAndroid