Facebook IPO: Is co-founder Saverin cheating US out of $100 million in taxes?
By renouncing his US citizenship, Facebook co-founder Eduardo Saverin could save some $100 million in taxes from Friday's Facebook IPO. Senators call it 'tax avoidance,' and aim to block it.
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As Facebook barrels toward one of the largest initial public offerings in US history on Friday, Mr. Schumer, New York's senior US senator, and Sen. Bob Casey (D) of Pennsylvania unveiled legislation Thursday that could pose a whole host of tough consequences for people like Mr. Saverin. He renounced his US citizenship last year and could save as much as $100 million in taxes on the proceeds of the Facebook IPO for doing so.
"This tax avoidance scheme is outrageous. Saverin has turned his back on the country that kept him safe, educated him, and helped him become a billionaire," Schumer told reporters Thursday. "This is a great American success story gone horribly wrong."
The Brazilian-born Saverin came to the United States at age 13, fleeing kidnapping threats against his wealthy father. He attended Harvard University, where he helped Facebook CEO Mark Zuckerberg found the global social-networking site but was pushed out in a dispute with Mr. Zuckerberg while the firm was still in its infancy. Saverin owns about 4 percent of Facebook's stock, good for about $3 billion when Facebook stock hits the public markets.
Saverin vows that he has renounced his citizenship because he is a "global citizen" and did not do so for tax purposes. He has relocated to Singapore, which has no capital-gains taxes.
Schumer's "status update," as he put it, for Saverin and some 3,000 other Americans who have made similar moves in the last five years is the "ex-PATRIOT Act." The bill stipulates that Americans wishing to renounce their US citizenship must prove to the IRS that they are doing so for non-tax reasons. Should they fail this test, they would be hit with a lifetime ban from entering the United States and a 30 percent tax on investment gains in the US.
Americans are already hit with an "exit tax" if they have an average income tax liability of $148,000 over the prior five years or net worth north of $2 million. The Schumer-Casey bill would keep those standards to determine whether individuals would qualify for their provision.The proposed measure could apply retroactively to anyone who gave up their American citizenship over the last decade.
Under current law, those who give up their passports are restricted from returning to the US. However, Schumer says there is no enforcement mechanism to prevent them from doing so – something the ex-PATRIOT Act would correct.
Although Saverin's decision was an "insult to the American people" and "spits in the eye" of American troops, Senator Casey says, the law wouldn't cast him out forever.
Saverin would be welcome back should he decide to pay his estimated tax bill in full.