Facebook's Saverin: Senators Propose Crackdown on 'Friends with Tax Benefits'
by AccountingWEB on
By Ken Berry
Two US Senators are feeling anything but friendly toward Eduardo Saverin, one of the cofounders of the social networking site Facebook.
Senators Chuck Schumer (D-NY) and Bob Casey (D-PA) have proposed new legislation, called the Ex-PATRIOT Act (Expatriation Prevention by Abolishing Tax-Related Incentives for Offshore Tenancy), which would impose a mandatory 30-percent capital gains tax rate for expatriates on all future investment gains. It's a quick response to news reports that Saverin renounced his American citizenship in order to sidestep US taxes after Facebook launched its much-ballyhooed initial public offering (IPO) on May 18.
"Saverin has turned his back from the country that welcomed him, kept him safe, educated him, and helped him become a billionaire," Schumer said at a press conference with Casey. He added that it was time to "defriend" the cofounder. "This is a great American success story gone horribly wrong." The proposed law is designed to crack down on around 5,000 individuals, including Saverin, who are avoiding tax by living abroad.
"Our two-prong plan is simple – if you renounce your citizenship to avoid paying taxes, you can't set foot in America again, and any investments you have in America will be taxed in the future at 30 percent," stated Schumer.
Saverin became a US citizen in 1998 after his family fled Brazil. He helped Mark Zuckerberg start Facebook while studying at Harvard University. The friends had a falling-out, but Saverin was still richly rewarded. He renounced his citizenship in 2011 shortly before the company announced its intentions to go public. Saverin has lived in Singapore since 2010. Because Singapore has no tax on capital gains, Schumer said renouncing his citizenship "could help him duck anywhere between $67 million and $100 million."
Under the proposed legislation, according to Casey, any US expatriate with a net worth of $2 million or more, or an average income tax liability of at least $148,000 in the previous five years, would be deemed to have renounced his or her citizenship, unless they can provide a legitimate explanation.
"This is an insult to the American people," Casey said. "We should make sure that he's held accountable. We've got troop oversees that are sacrificing on our behalf every day, for all the values that we hold dear, and Mr. Saverin spits in their eyes."
The tax would prospectively impose a tax on an individual's future investment gains, so it may be too late to penalize Saverin for his initial decision. However, Schumer said the law would still affect Saverin and others who invest in the United States in order to maintain their net worth.