Senator Responds to Saverin’s Tax SchemeBy: Shawn Hess - May 17, 2012
We’ve been following Facebook co-founder Eduardo Saverin and his exit from the United States involving him renouncing his US citizenship. According to representatives speaking on Saverin’s behalf, his decision to leave the US has nothing to do with avoiding taxes, but rather to do with freedom to live and invest where he sees fit.
Apparently we were not the only ones following Saverin’s story, Senator Charles Schumer is calling Saverin’s plan to renounce his citizenship a “scam” and he’s taking action to make sure this isn’t a strategy others can pursue in the future. Essentially the legislation he’s crafting would impose a 30% capital gains tax on any citizen who decides to renounce and keep their US investments.
The current exit tax is similar in the way that it assumes a fee based on actually selling the investments. I believe 30% would be a considerable increase, but not completely different than what Eduardo is required to pay now. One clear difference is that Saverin could indefinitely delay paying the exit tax as it is, until he actually does sell the stock, as the current exit tax allows.
Introduced at a news conference this mourning, the “Expatriation Prevention by Abolishing Tax-Related Incentives for Offshore Tenancy” Act would discourage investors from renouncing citizenship in order to evade high US taxes. A main component of the act prohibits those who renounce from ever entering the United States again.
So it looks like things are heating up for Eduardo as lawmakers begin to take notice of his exit from the United States. Currently living in Singapore, Saverin amassed his education and his wealth in the US after attending Harvard. He was born in Brazil and has had US citizenship since 1998. He is estimated to own approximately 4% of Facebook, which will be worth a hefty fortune after tomorrows much anticipated public offering.