Sens. Chuck Schumer and Bob Casey today delivered a scathing status update for “eye-spitting” Facebook co-founder Eduardo Saverin: Stop attempting to dodge your taxes by renouncing your U.S. citizenship or never step foot in the U.S. again.
“This guy just thinks he can rip us off by engaging in this scheme,” Casey, D-Pa., said at a Capitol Hill news conference this morning. “We’ve got troops overseas that are sacrificing on our behalf every day, all the values that we hold dear. And Mr. Saverin spits in their eye, he spits in the eye of the American people. It’s an insult. He should be held accountable.”
Saverin, 30, relinquished his U.S. citizenship in September 2011 before the company announced its planned initial public offering of stock, which will debut this week. The move was likely a financial one because he owns an estimated 4 percent of Facebook and stands to make $4 billion when the company goes public.
“Saverin has turned his back on the country that welcomed him and kept him safe, educated him and helped him become a billionaire,” Schumer, D-N.Y., said. “This is a great American success story gone horribly wrong.”
Saverin, who was born in Brazil, raised in Miami and educated at Harvard, would reap the benefit of tax savings by becoming a permanent resident of Singapore, which levies no capital gains taxes. He has lived there for several years.
“My decision to expatriate was based solely on my interest in working and living in Singapore, where I have been since 2009,” he said in a statement this afternoon. “I am obligated to and will pay hundreds of millions of dollars in taxes to the United States government. I have paid and will continue to pay any taxes due on everything I earned while a U.S. citizen. It is unfortunate that my personal choice has led to a public debate, based not on the facts, but entirely on speculation and misinformation.
“As a native of Brazil who immigrated to the United States, I am very grateful to the U.S. for everything it has given me. In 2004, I invested my life’s savings into a start-up company that initially was run out of a college dorm room. Since then the company has expanded dramatically, has created thousands of jobs in the United States and elsewhere, and spawned countless new companies across the United States and other countries.”
But Schumer was unrelenting this morning. “It just so happens the country where he has chosen to reside, Singapore, has no capital gains tax,” Schumer added. “This tax-avoidance scheme is outrageous. Eduardo Saverin wants to ‘defriend’ the United States of America just to avoid taxes we aren’t going to let him get away with it.”
So to stop Saverin, and others who have relinquished their citizenship for tax avoidance, Sens. Schumer and Bob Casey, D-Pa., unveiled the “Ex-PATRIOT” – “Expatriation Prevention by Abolishing Tax-Related Incentives for Offshore Tenancy” – Act today.
The act is intended to respond directly to Saverin’s move, which they call a “scheme” that would “help him duck up to $67 million in taxes.”
The plan would re-impose taxes on expatriates like Saverin even after they flee the United States and take up residence in a foreign country.
If the Internal Revenue Service determines that people renounce their citizenship to avoid taxes, according to the proposal, they would then be subject to a 30 percent capital gains tax on future investment gains in the United States, regardless of where they live.
But most notably, the plan would bar individuals like Saverin from ever re-entering the United States again.
The proposal would affect any American who has $2 million in net worth or an average income tax liability of at least $148,000 for the previous five years and then seeks to renounce his or her citizenship. The person will be presumed to have renounced his or her citizenship for tax avoidance purposes unless the individual can demonstrate otherwise to the IRS.
The burden of proof would be on people to show that they didn’t relocate for tax purposes. There would be no penalty if it turned out that they renounced their citizenship for legitimate reasons.
The law now is already supposed to bar re-entry for individuals like Saverin, but there have been problems enforcing it, the senators say, pointing to the 1,700 people last year who gave up their U.S. passports, up from 235 in 2008. The law, passed in 1996, contains no enforcement provisions. No individual has ever been barred from returning to the United States for tax avoidance, so the proposal would add an enforcement component.
If Saverin, or anyone else, changes his mind, he could pay his back taxes and return to the United States.
The senators plan to move on this bill “as soon as possible” in the Senate.