11 ms·

Renouncing citizenship: Did Eduardo Saverin do anything wrong?

43 points by antonellis 14y ago

kinkora 14y ago
It seems people have missed the article where Eduardo explains why he renounced his citizenship:- http://news.ycombinator.com/item?id=3972209 http://news.ycombinator.com/item?id=3972209
- pasbesoin 14y ago
  I'm not in a position to evaluate this, but I have seen other reporting to the effect that U.S. citizens are facing increasing challenges in investing abroad, in as much as foreign entities don't want the complications in reporting (and attendant risk) mandated by the U.S. government and its IRS. (Which is the main point in the parent's linked thread that posts a WSJ article).
kika 14y ago
I wonder what Eduardo could have done wrong. He came to the US as a wealthy man, paid for the education, invested his money into stock trading then invested his proceeds into some flimsy venture written in PHP and created thousands of jobs and billions of wealth for risky investors. Now he's heading for the exit and going to buy an exit ticket worth half a billion dollars. Instead of creating some obscure umbrella corporation in some shady overseas jurisdiction, "sell" his shares to it and do not pay a dime. And now they call him having no respect and appreciation for his foster country. I'll never manage to understand these commies.
- rdtsc 14y ago
  I would guess a lot of it is envy disguised as patriotism.
zmitri 14y ago
I don't think he did anything wrong... but, personally, as an immigrant in the United States it's tough to swallow. I'm currently in H-1B status and work for a top tier hedge fund. I recently resigned because I decided it was time to go full on with my own company, and even though I have lived here for 2 years, paid my share of taxes, and have enough saved up to support myself for at least 1.5 to 2 years, if I don't succeed/raise money to sponsor my own H1B in the next few months (or take a new job) there's a chance I will have to go home. Oh, and even getting a chance at getting those few months, is dependent on the USCIS approving my change in status from a specialist worker to a "tourist." There's just so little room for error as an immigrant, but the fact that you can make lots of mistakes is one of the things that makes the US so awesome for gutsy Americans. Immigration is a messed up thing and it's just sad to see someone throw a citizenship away that so many people would fight like crazy for. I doubt he would have gotten that first chance to make it big anywhere else.
- rdtsc 14y ago
  It is very hard to comprehend for us what it is like to have wealth approaching billions of dollars. Citizenship doesn't matter anymore. You become a citizen of the world if you wish. You can own your own plane or own shares in a plane. You can live in Singapore, visit Monaco for a weekend, then quickly fly back. You can have a team of lawyers and servants on hand. Planning and advising what citizenships to gain and which ones to lose. I think this was just one advice he received and he let them set it up for him. With that much wealth, taxes all of the sudden are handled differently. The money you can pay a team of tax lawyers and accountants to offshore it, and protect it, is a drop in the bucket, compared to the tax you'd pay. You'd be a fool not to do it. But year, at first, as someone who also jumped through years of red tape to gain citizenship, this is baffling, but you have to realize these individuals live in a different world, by different rules.
- romeodelight 14y ago
  Singapore doesn’t have a capital gains tax. At 15% long-term capital gains tax rate on $3.84B (4% of Facebook), He saved $576 Million by giving up his citizenship and moving to Singapore.
salimmadjd 14y ago
I'm an immigrant myself and I owe everything I have to USA! There is almost no other country in the world, where an immigrant can make as much impact as a native person can. For this opportunity we should give back as much as we can.
- dantheman 14y ago
  Giving back != paying taxes
- hnwh 14y ago
  And are you still paying taxes on your American income to you r home country? B/c that's how tax laws work for the US. If you really believe what you're saying, send 30% of your income to your home country, just because you're loyal like that. Also stop taking deductions from your American taxes, just so you can help out the govt. And if ever you decide to move back to your original country but keep your US citizenship/green card, don't forget to send 30% of your foreign income to the US every year for the rest of your life. Because you owe everything to the US, right? Thanks
maercsrats 14y ago
Fuck'em. It was a dick move given all the opportunities he got in this country. I prefer rich people more like this: http://www.thedailybeast.com/articles/2012/04/30/stephen-king-tax-me-for-f-s-sake.html http://www.thedailybeast.com/articles/2012/04/30/stephen-kin...
earbitscom 14y ago
If American infrastructure invented Facebook then American infrastructure would have invented Facebook.
- bermanoid 14y ago
  Actually it did, and it was called the Harvard Connection, but a scam artist of a contractor thought it was a good idea and lead the founders on as if he was putting the finishing touches on the site to delay their launch and them settled that crime for pennies on the dollar, and here we are. How complicit Saverin was in this crime is questionable, but it's clear that Zuckerberg knew exactly who he was "fucking" (his words) and how from his IMs.
newbie12 14y ago
Saverin's exit is a warning sign, a symptom of a growing sickness in America. All of the envious, hateful attacks on the "top 1%" and the likely prospect of punitive new taxes to support our out-of-control entitlement state make entrepreneurs like Saverin a target, and he knows it.
- Aloisius 14y ago
  Yes, the out of control entitlement state which collects... significantly less taxes than most of the 20th century. I hate to sound like a populist, but for goodness sake some perspective is necessary.
  - dantheman 14y ago
    There's a difference between tax rate and effective tax rate; the high taxes of yore were never really paid by anyone with money.
    - eli 14y ago
      Prett sure the effective tax rate is declining as well...
      - romeodelight 14y ago
        The average effective corporate tax rates last year was 12.1%
  - javert 14y ago
    AFAIK your claim is factually untrue by a very large margin. Care to explain?
    - Aloisius 14y ago
      The top marginal tax rate averaged about 54% for the 20th century: http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=213 http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Doc... It peaked at 94% during WW2, but even absent of any wars, it was significantly higher than it is now (35%). It was even worse once you work out how much more progressive our tax is now than it used to be. In 1982, you were paying 50% federal tax on all income above $106K (about $200K in today's dollars). Now the top tax rate doesn't even kick in until after $388K. People today are paying historically low tax rates mostly because of the Republican's cynical attempt to "starve the beast" in order to reduce spending - which I might add is entirely backwards as it gives everyone what they want and no one feels any pain. If they really wanted to reduce spending, they'd force tax raises so everyone felt the consequences of every new government program.
Alienz 14y ago
As long as he didn't broken any law, and he didn't regret what he did, why someone would say he did anything wrong? You may think, he earn his money in the US soil and he should contribute back to the US people. Morally correct. However, if that means he have to fund the US government by paying tax and portion of that money eventually used for launching a war in the middle east, I also think legally avoiding tax to the government is morally correct.
- Drbble 14y ago
  Taxes don't fund war. Borrowing funds war.
  - sokoloff 14y ago
    Taxes are the basis for repayment upon which those funds are lent to the government. It's like saying the median house isn't bought with income, but rather with a mortgage. Generally true, but try getting a mortgage without any income (now).
davidbanham 14y ago
The big idea here is that no other country in the world handles taxes in this way. As far as I'm aware, no other country is as aggressive as the US in taxing income earned by it's citizens while working overseas.
- spullara 14y ago
  He "earned" the money in the US and only our deferred tax model on stocks allowed him to extract the value much later. I wonder if we will ever just tax the actual options, shares or RSUs by number rather than by their dollar value.
- greeneggs 14y ago
  I don't see how this is relevant. Just because no other country taxes in the same way as the US, doesn't make it acceptable to dodge US taxes. You don't get to choose what laws you follow based on what other countries' laws are. I paid my taxes when I was working abroad, and find it really annoying that billionaires are skipping out. In any case, the work was all done while he was a US citizen, even if he deferred realizing his gains. If this is becoming standard practice among the wealthy, then the US needs to restrict immigration more tightly.
jonshea 14y ago
By my math, Eduardo Saverin doesn’t avoid any tax at all by leaving the US, regardless of whether or not his stock goes up or down. If he leaves, the US takes 15% of his stock now. If he stays, the US takes 15% of his stock later. But either way, the US have taken away 15% of his ability to spend. Let’s work through it with numbers, in case that isn’t clear. Say Saverin has $100 worth of Facebook stock. He renounces US citizenship. He sells enough stock to pay $15 to the government, leaving him with $85 in Facebook stock. Over the next year, Facebook doubles in value, leaving him with $170 in stock. He cashes out, and there’s no tax, so he ends up with $170 in cash. Now imagine he stays in the US. He has $100 in Facebook stock, which he pays no tax on because there is no taxable event. Facebook doubles in value over the next year, so he ends up with $200 in stock. Then he cashes out, paying 15% in capital gains, leaving him with $170 cash. Clearly he ends up with the same amount of cash either way. Perhaps Saverin is avoiding tax by leaving the US, but neither this article nor any other article I have read identifies how he is doing so.
- seats 14y ago
  See this comment below. Also you could make the case that you are locking in the 15% LT cap gains rate, which could and likely will increase at some unknown point in the future. >> The numbers on and analysis of his tax liability in the article are demonstrably wrong - at a level of error unworthy of The Economist. His tax liability is calculated on the value of the stock as of the date he renounces citizenship, which was last September. Today, Facebook is worth maybe $100 billion. Early this year, a private equity offering put the value at $50 billion. Last fall, who knows, and it's all subject to negotiation with the IRS - my guess is no more than $25 billion. That means he evades 75 % of the tax bite by renouncing citizenship, and will be paying at most maybe $125 to $150 million of that $500 to $600 million tax liability he would owe if he sold all his stock next week.
  - jonshea 14y ago
    If we assume that Saverin had to pay his taxes by selling shares at the same price at which the IRS assessed then, then my logic still holds. Saverin would have to sell 15% of his stock to pay the 15% tax. If, as you suggest, he is able to sell his shares at a greater valuation than the IRS uses to calculate his exit tax, then you are correct. When you renounce your citizenship, I have no idea how long the IRS gives you to actually pony up the exit tax.
jebblue 14y ago
Legally or morally? Legally, I'm not a lawyer but I would guess not. Morally, he has to live with the decision he made oh and legally too since renouncing US citizenship is permanent (as far as I can understand the government site I read).
- sdm 14y ago
  Since when has not being an American citizen made you immoral?
  - jebblue 14y ago
    I was referring to the tax question at the heart of the debate. I'm not the most articulate person, perhaps moral is not the best or most appropriate word but it doesn't feel that far off.
bradleyjg 14y ago
I'm not saying he did anything wrong, but it is a bit of a slap in the face. I think the US should have a policy of not admitting renouncers to the country under any status.
- jamespcole2 14y ago
  lol, overreact much? People change citizenship all the time for various reasons, finance, marriage, lifestyle, work etc. it would be crazy to block people from returning. Personally I'd take Singapore over the US any day of the week if I was choosing somewhere to live and had that kind of money(Singapore is an expensive place to live).
- hnwh 14y ago
  what happened to "land of the free", as in freedome to decide where you live and your citizenship?
  - bradleyjg 14y ago
    No one can stop you from renouncing your citizenship, but if you do you are are an alien. Ask some aliens how easy it is to get a visa to the US. If you voluntarily put yourself in that category at very least you should be at the back of the line.
patrickgzill 14y ago
Thomas Jefferson: "Our ancestors... possessed a right, which nature has given to all men, of departing from the country in which chance, not choice, has placed them, of going in quest of new habitations, and of there establishing new societies, under such laws and regulations as, to them, shall seem most likely to promote public happiness"
pwim 14y ago
There are only two countries in the world that tax non-residents: America and Eritrea. http://renunciationguide.com/Citizenship-Based-Taxation-International-Comparison.html http://renunciationguide.com/Citizenship-Based-Taxation-Inte... As there is no representative for American citizens abroad (they can vote in Federal elections, but the district is based on place of last residence), this is essentially taxation without representation. Saverin has lived in Singapore since 2009. He renounced his citizenship in 2011. http://en.wikipedia.org/wiki/Eduardo_Saverin http://en.wikipedia.org/wiki/Eduardo_Saverin Given the situation, I don't see why he would keep American citizenship.
tomjen3 14y ago
Of course not. And I don't want to hear complaints from people who haven't paid at least 500 million in taxes. He has done much more for the us than has most people on welfare. They certainly haven't paid their fair share.
rsanchez1 14y ago
Objectively, he didn't do anything illegal. He just wants a bigger chunk of his cash. The problem people have is that the cash is going to a "1%"er, instead of lining the pockets of career politicians in Washingon, er, I mean paying for the health care of the poor.
Coswyn 14y ago
Ethically, yes. Legally, no.

43 points by antonellis 14y ago

It seems people have missed the article where Eduardo explains why he renounced his citizenship:- http://news.ycombinator.com/item?id=3972209 http://news.ycombinator.com/item?id=3972209

pasbesoin 14y ago
I'm not in a position to evaluate this, but I have seen other reporting to the effect that U.S. citizens are facing increasing challenges in investing abroad, in as much as foreign entities don't want the complications in reporting (and attendant risk) mandated by the U.S. government and its IRS. (Which is the main point in the parent's linked thread that posts a WSJ article).

kika 14y ago

I wonder what Eduardo could have done wrong. He came to the US as a wealthy man, paid for the education, invested his money into stock trading then invested his proceeds into some flimsy venture written in PHP and created thousands of jobs and billions of wealth for risky investors. Now he's heading for the exit and going to buy an exit ticket worth half a billion dollars. Instead of creating some obscure umbrella corporation in some shady overseas jurisdiction, "sell" his shares to it and do not pay a dime. And now they call him having no respect and appreciation for his foster country. I'll never manage to understand these commies.

rdtsc 14y ago
I would guess a lot of it is envy disguised as patriotism.

zmitri 14y ago

I don't think he did anything wrong... but, personally, as an immigrant in the United States it's tough to swallow. I'm currently in H-1B status and work for a top tier hedge fund. I recently resigned because I decided it was time to go full on with my own company, and even though I have lived here for 2 years, paid my share of taxes, and have enough saved up to support myself for at least 1.5 to 2 years, if I don't succeed/raise money to sponsor my own H1B in the next few months (or take a new job) there's a chance I will have to go home. Oh, and even getting a chance at getting those few months, is dependent on the USCIS approving my change in status from a specialist worker to a "tourist." There's just so little room for error as an immigrant, but the fact that you can make lots of mistakes is one of the things that makes the US so awesome for gutsy Americans. Immigration is a messed up thing and it's just sad to see someone throw a citizenship away that so many people would fight like crazy for. I doubt he would have gotten that first chance to make it big anywhere else.

rdtsc 14y ago
It is very hard to comprehend for us what it is like to have wealth approaching billions of dollars. Citizenship doesn't matter anymore. You become a citizen of the world if you wish. You can own your own plane or own shares in a plane. You can live in Singapore, visit Monaco for a weekend, then quickly fly back. You can have a team of lawyers and servants on hand. Planning and advising what citizenships to gain and which ones to lose. I think this was just one advice he received and he let them set it up for him. With that much wealth, taxes all of the sudden are handled differently. The money you can pay a team of tax lawyers and accountants to offshore it, and protect it, is a drop in the bucket, compared to the tax you'd pay. You'd be a fool not to do it. But year, at first, as someone who also jumped through years of red tape to gain citizenship, this is baffling, but you have to realize these individuals live in a different world, by different rules.
romeodelight 14y ago
Singapore doesn’t have a capital gains tax. At 15% long-term capital gains tax rate on $3.84B (4% of Facebook), He saved $576 Million by giving up his citizenship and moving to Singapore.

salimmadjd 14y ago

I'm an immigrant myself and I owe everything I have to USA! There is almost no other country in the world, where an immigrant can make as much impact as a native person can. For this opportunity we should give back as much as we can.

dantheman 14y ago
Giving back != paying taxes
hnwh 14y ago
And are you still paying taxes on your American income to you r home country? B/c that's how tax laws work for the US. If you really believe what you're saying, send 30% of your income to your home country, just because you're loyal like that. Also stop taking deductions from your American taxes, just so you can help out the govt. And if ever you decide to move back to your original country but keep your US citizenship/green card, don't forget to send 30% of your foreign income to the US every year for the rest of your life. Because you owe everything to the US, right? Thanks

maercsrats 14y ago

Fuck'em. It was a dick move given all the opportunities he got in this country. I prefer rich people more like this: http://www.thedailybeast.com/articles/2012/04/30/stephen-king-tax-me-for-f-s-sake.html http://www.thedailybeast.com/articles/2012/04/30/stephen-kin...

earbitscom 14y ago

If American infrastructure invented Facebook then American infrastructure would have invented Facebook.

bermanoid 14y ago
Actually it did, and it was called the Harvard Connection, but a scam artist of a contractor thought it was a good idea and lead the founders on as if he was putting the finishing touches on the site to delay their launch and them settled that crime for pennies on the dollar, and here we are. How complicit Saverin was in this crime is questionable, but it's clear that Zuckerberg knew exactly who he was "fucking" (his words) and how from his IMs.

newbie12 14y ago

Saverin's exit is a warning sign, a symptom of a growing sickness in America. All of the envious, hateful attacks on the "top 1%" and the likely prospect of punitive new taxes to support our out-of-control entitlement state make entrepreneurs like Saverin a target, and he knows it.

Aloisius 14y ago
Yes, the out of control entitlement state which collects... significantly less taxes than most of the 20th century. I hate to sound like a populist, but for goodness sake some perspective is necessary.
- dantheman 14y ago
  There's a difference between tax rate and effective tax rate; the high taxes of yore were never really paid by anyone with money.
  - eli 14y ago
    Prett sure the effective tax rate is declining as well...
    - romeodelight 14y ago
      The average effective corporate tax rates last year was 12.1%
- javert 14y ago
  AFAIK your claim is factually untrue by a very large margin. Care to explain?
  - Aloisius 14y ago
    The top marginal tax rate averaged about 54% for the 20th century: http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=213 http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Doc... It peaked at 94% during WW2, but even absent of any wars, it was significantly higher than it is now (35%). It was even worse once you work out how much more progressive our tax is now than it used to be. In 1982, you were paying 50% federal tax on all income above $106K (about $200K in today's dollars). Now the top tax rate doesn't even kick in until after $388K. People today are paying historically low tax rates mostly because of the Republican's cynical attempt to "starve the beast" in order to reduce spending - which I might add is entirely backwards as it gives everyone what they want and no one feels any pain. If they really wanted to reduce spending, they'd force tax raises so everyone felt the consequences of every new government program.

Alienz 14y ago

As long as he didn't broken any law, and he didn't regret what he did, why someone would say he did anything wrong? You may think, he earn his money in the US soil and he should contribute back to the US people. Morally correct. However, if that means he have to fund the US government by paying tax and portion of that money eventually used for launching a war in the middle east, I also think legally avoiding tax to the government is morally correct.

Drbble 14y ago
Taxes don't fund war. Borrowing funds war.
- sokoloff 14y ago
  Taxes are the basis for repayment upon which those funds are lent to the government. It's like saying the median house isn't bought with income, but rather with a mortgage. Generally true, but try getting a mortgage without any income (now).

davidbanham 14y ago

The big idea here is that no other country in the world handles taxes in this way. As far as I'm aware, no other country is as aggressive as the US in taxing income earned by it's citizens while working overseas.

spullara 14y ago
He "earned" the money in the US and only our deferred tax model on stocks allowed him to extract the value much later. I wonder if we will ever just tax the actual options, shares or RSUs by number rather than by their dollar value.
greeneggs 14y ago
I don't see how this is relevant. Just because no other country taxes in the same way as the US, doesn't make it acceptable to dodge US taxes. You don't get to choose what laws you follow based on what other countries' laws are. I paid my taxes when I was working abroad, and find it really annoying that billionaires are skipping out. In any case, the work was all done while he was a US citizen, even if he deferred realizing his gains. If this is becoming standard practice among the wealthy, then the US needs to restrict immigration more tightly.

jonshea 14y ago

By my math, Eduardo Saverin doesn’t avoid any tax at all by leaving the US, regardless of whether or not his stock goes up or down. If he leaves, the US takes 15% of his stock now. If he stays, the US takes 15% of his stock later. But either way, the US have taken away 15% of his ability to spend. Let’s work through it with numbers, in case that isn’t clear. Say Saverin has $100 worth of Facebook stock. He renounces US citizenship. He sells enough stock to pay $15 to the government, leaving him with $85 in Facebook stock. Over the next year, Facebook doubles in value, leaving him with $170 in stock. He cashes out, and there’s no tax, so he ends up with $170 in cash. Now imagine he stays in the US. He has $100 in Facebook stock, which he pays no tax on because there is no taxable event. Facebook doubles in value over the next year, so he ends up with $200 in stock. Then he cashes out, paying 15% in capital gains, leaving him with $170 cash. Clearly he ends up with the same amount of cash either way. Perhaps Saverin is avoiding tax by leaving the US, but neither this article nor any other article I have read identifies how he is doing so.

seats 14y ago
See this comment below. Also you could make the case that you are locking in the 15% LT cap gains rate, which could and likely will increase at some unknown point in the future. >> The numbers on and analysis of his tax liability in the article are demonstrably wrong - at a level of error unworthy of The Economist. His tax liability is calculated on the value of the stock as of the date he renounces citizenship, which was last September. Today, Facebook is worth maybe $100 billion. Early this year, a private equity offering put the value at $50 billion. Last fall, who knows, and it's all subject to negotiation with the IRS - my guess is no more than $25 billion. That means he evades 75 % of the tax bite by renouncing citizenship, and will be paying at most maybe $125 to $150 million of that $500 to $600 million tax liability he would owe if he sold all his stock next week.
- jonshea 14y ago
  If we assume that Saverin had to pay his taxes by selling shares at the same price at which the IRS assessed then, then my logic still holds. Saverin would have to sell 15% of his stock to pay the 15% tax. If, as you suggest, he is able to sell his shares at a greater valuation than the IRS uses to calculate his exit tax, then you are correct. When you renounce your citizenship, I have no idea how long the IRS gives you to actually pony up the exit tax.

jebblue 14y ago

Legally or morally? Legally, I'm not a lawyer but I would guess not. Morally, he has to live with the decision he made oh and legally too since renouncing US citizenship is permanent (as far as I can understand the government site I read).

sdm 14y ago
Since when has not being an American citizen made you immoral?
- jebblue 14y ago
  I was referring to the tax question at the heart of the debate. I'm not the most articulate person, perhaps moral is not the best or most appropriate word but it doesn't feel that far off.

bradleyjg 14y ago

I'm not saying he did anything wrong, but it is a bit of a slap in the face. I think the US should have a policy of not admitting renouncers to the country under any status.

jamespcole2 14y ago
lol, overreact much? People change citizenship all the time for various reasons, finance, marriage, lifestyle, work etc. it would be crazy to block people from returning. Personally I'd take Singapore over the US any day of the week if I was choosing somewhere to live and had that kind of money(Singapore is an expensive place to live).
hnwh 14y ago
what happened to "land of the free", as in freedome to decide where you live and your citizenship?
- bradleyjg 14y ago
  No one can stop you from renouncing your citizenship, but if you do you are are an alien. Ask some aliens how easy it is to get a visa to the US. If you voluntarily put yourself in that category at very least you should be at the back of the line.

patrickgzill 14y ago

Thomas Jefferson: "Our ancestors... possessed a right, which nature has given to all men, of departing from the country in which chance, not choice, has placed them, of going in quest of new habitations, and of there establishing new societies, under such laws and regulations as, to them, shall seem most likely to promote public happiness"

pwim 14y ago

There are only two countries in the world that tax non-residents: America and Eritrea. http://renunciationguide.com/Citizenship-Based-Taxation-International-Comparison.html http://renunciationguide.com/Citizenship-Based-Taxation-Inte... As there is no representative for American citizens abroad (they can vote in Federal elections, but the district is based on place of last residence), this is essentially taxation without representation. Saverin has lived in Singapore since 2009. He renounced his citizenship in 2011. http://en.wikipedia.org/wiki/Eduardo_Saverin http://en.wikipedia.org/wiki/Eduardo_Saverin Given the situation, I don't see why he would keep American citizenship.

tomjen3 14y ago

Of course not. And I don't want to hear complaints from people who haven't paid at least 500 million in taxes. He has done much more for the us than has most people on welfare. They certainly haven't paid their fair share.

rsanchez1 14y ago

Objectively, he didn't do anything illegal. He just wants a bigger chunk of his cash. The problem people have is that the cash is going to a "1%"er, instead of lining the pockets of career politicians in Washingon, er, I mean paying for the health care of the poor.

Coswyn 14y ago

Ethically, yes. Legally, no.