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People disagree on whether he is/was playing by the rules, and this is the very heart of the debate. It's not an issue of objective technical compliance, since

by rprasad 14y ago

People disagree on whether he is/was playing by the rules, and this is the very heart of the debate. It's not an issue of objective technical compliance, since he has objectively complied with the rules. However, like all anti-abuse provisions of the tax code, there is a subjective element: Did Eduardo renounce his citizenship to avoid paying U.S. federal income taxes on the sale of his Facebook stock? If the answer is yes, there is a good probability that the IRS will pursue him for taxes arising from the IPO. (Note: in most situations, the primary intent must be to avoid taxes, but in some situations, any intent to avoid taxes is enough.) Furthermore, he could be barred from this country ("excludable") under U.S. immigration laws. The Senator has indicated that he believes the answer is yes. It's not a matter of spite; it's a mater of timing. Eduardo has been eligible for Singaporean citizenship for some time now, yet it was only when the Facebook IPO became likely (last fall) that he actually took steps to renounce his U.S. citizenship. (If you read other news sources, you will see the Senator refer to the timing issue.) In the end, the only people who know what Eduardo's subjective purpose was in renouncing his citizenship are Eduardo and the advisors he consulted with in reaching this decision.

beagle3 14y ago
I might have found this argument (for "not being spiteful" or "it's fairness, not just political gain") compelling, if Schumer and the media was having the same feat over the double-irish sandwich practiced for years by the like of Apple, Google and Microsoft (with some "nevada sauce") -- where the cumulative effect on the bottom tax line over the last few years is about a hundred to a thousand times larger than the saverin case (we're talking 60M right now vs. 20-60B). Furthermore, saverin is actually giving something up, whereas those corporates are paying 2-3% and giving up nothing. As rprasad mentions, the laws are already on the books to deal with Saverin-like cases; the IRS has the tools to go after him, with no new laws needed. They were better equipped before 2008 (10 years after denouncing citizenship, capital gains still applied), but congress changed that to just an exit tax. I see nothing wrong in what saverin is doing. I see everything wrong with what Schumer is doing.
- rprasad 14y ago
  The media did have the same feat over the double-irish structure. It's possible that you did not notice this at the time, but there was definitely an uproar over what many considered to be tax evasion by U.S. companies. In fact, there was another uproar about this earlier this year when Apple was approaching its recordsetting valuation--many newspapers were pointing out Apple maintained an extremely large overseas cash hoard utilizing the double-irish to avoid paying U.S. taxes on that money. Several legislators have brought that up, on both sides, as justification for either doing away with corporate tax breaks, or for doing away with worldwide taxation. Note that the corporations are effectively giving up something -- so long as they want to avoid U.S. taxes on their foreign cash, they cannot use that cash on any aspect of the U.S. business. It's not the same thing as citizenship, but cash is the lifeforce of business. There is nothing legally wrong with what Saverin is doing...depending on why he did it. As I have noted in other comments, there is a subjective element to the abuse provisions of the law. If that subjective element is deemed satisfied, then legally, he will be deemed to have donse something wrong. That determination is for a judge to make.
  - beagle3 14y ago
    > The media did have the same feat over the double-irish structure. It's possible that you did not notice this at the time, but there was definitely an uproar over what many considered to be tax evasion by U.S. companies. There was a small uproar. I was following (and still am). And yet, the tone was along the lines of "well, if we took away their ability to do that, they'd take their business somewhere else, so we shouldn't". Did any senator or member of the house propose a "minimal 30% tax" on Apple or Microsoft or Google? did I miss that one too? > Note that the corporations are effectively giving up something -- so long as they want to avoid U.S. taxes on their foreign cash, they cannot use that cash on any aspect of the U.S. business. It's not the same thing as citizenship, but cash is the lifeforce of business. I stand corrected, they are giving up something. But it's something as small as "by paying 2% taxes instead of 30%, you give up the right to cut your own hair - you have to go to a barbershop". e.g. Apple bought several companies in the last couple of years in Sweden (Polar Rose), Israel (Anobit), and the US. They paid for the first two with outside money, and for the last one with US money. If all their money was repatriated....., it wouldn't have mattered to them at all. Furthermore, they're all banking on a "tax free" or "low tax" repatriation day, for which they've been lobbying for a while; they got one 15 years ago. Corporates taking the long view can bank on that. People can't. > That determination is for a judge to make. Exactly. The relevant laws are already on the books. Schumer is just looking for votes.

by rprasad 14y ago

beagle3 14y ago

I might have found this argument (for "not being spiteful" or "it's fairness, not just political gain") compelling, if Schumer and the media was having the same feat over the double-irish sandwich practiced for years by the like of Apple, Google and Microsoft (with some "nevada sauce") -- where the cumulative effect on the bottom tax line over the last few years is about a hundred to a thousand times larger than the saverin case (we're talking 60M right now vs. 20-60B). Furthermore, saverin is actually giving something up, whereas those corporates are paying 2-3% and giving up nothing. As rprasad mentions, the laws are already on the books to deal with Saverin-like cases; the IRS has the tools to go after him, with no new laws needed. They were better equipped before 2008 (10 years after denouncing citizenship, capital gains still applied), but congress changed that to just an exit tax. I see nothing wrong in what saverin is doing. I see everything wrong with what Schumer is doing.

rprasad 14y ago
The media did have the same feat over the double-irish structure. It's possible that you did not notice this at the time, but there was definitely an uproar over what many considered to be tax evasion by U.S. companies. In fact, there was another uproar about this earlier this year when Apple was approaching its recordsetting valuation--many newspapers were pointing out Apple maintained an extremely large overseas cash hoard utilizing the double-irish to avoid paying U.S. taxes on that money. Several legislators have brought that up, on both sides, as justification for either doing away with corporate tax breaks, or for doing away with worldwide taxation. Note that the corporations are effectively giving up something -- so long as they want to avoid U.S. taxes on their foreign cash, they cannot use that cash on any aspect of the U.S. business. It's not the same thing as citizenship, but cash is the lifeforce of business. There is nothing legally wrong with what Saverin is doing...depending on why he did it. As I have noted in other comments, there is a subjective element to the abuse provisions of the law. If that subjective element is deemed satisfied, then legally, he will be deemed to have donse something wrong. That determination is for a judge to make.
- beagle3 14y ago
  > The media did have the same feat over the double-irish structure. It's possible that you did not notice this at the time, but there was definitely an uproar over what many considered to be tax evasion by U.S. companies. There was a small uproar. I was following (and still am). And yet, the tone was along the lines of "well, if we took away their ability to do that, they'd take their business somewhere else, so we shouldn't". Did any senator or member of the house propose a "minimal 30% tax" on Apple or Microsoft or Google? did I miss that one too? > Note that the corporations are effectively giving up something -- so long as they want to avoid U.S. taxes on their foreign cash, they cannot use that cash on any aspect of the U.S. business. It's not the same thing as citizenship, but cash is the lifeforce of business. I stand corrected, they are giving up something. But it's something as small as "by paying 2% taxes instead of 30%, you give up the right to cut your own hair - you have to go to a barbershop". e.g. Apple bought several companies in the last couple of years in Sweden (Polar Rose), Israel (Anobit), and the US. They paid for the first two with outside money, and for the last one with US money. If all their money was repatriated....., it wouldn't have mattered to them at all. Furthermore, they're all banking on a "tax free" or "low tax" repatriation day, for which they've been lobbying for a while; they got one 15 years ago. Corporates taking the long view can bank on that. People can't. > That determination is for a judge to make. Exactly. The relevant laws are already on the books. Schumer is just looking for votes.