Facebook Co-Founder Renounces U.S. Citizenship Because of Horrible Tax System
Bert Atkinson Jr. | On 11, May 2012
In a giant Facebook style middle finger to the United States tax system, Facebook co-founder Eduardo Saverin has decided to renounce his U.S. citizenship prior to the company’s initial public offering (IPO.)
According to Bloomberg.com, Saverin’s stake in ownership is approximately 4% of the company, and after an IPO, which looks to raise almost $12 billion, his share could result in a $3.84 billion gain for the 30-year-old who will become a resident of Singapore. He is expected to live in Singapore for an extended and indefinite period of time.
The move “may help him cut the tax bill stemming from his Facebook stake, and avoid capital gains taxes on his future investments. Singapore doesn’t have a capital gains tax.”
Saverin will not be able to avoid all U.S. taxes though because of what is basically an exit tax. Americans who renounce their citizenship are still expected to pay capital gains on their stock holdings even if they do not sell the shares.
Reuven S. Avi-Yonah, the director of the International Tax Program at the University of Michigan’s law school, said it is a “very smart idea” to renounce citizenship well before an IPO because “once [the value of the company is] public you can’t fool around with the value.” Saverin’s gains and subsequent taxes would be based upon an appraisal by tax advisors.
Economists would absolutely agree with me: the more you tax people, the more likely the people are to figure a way to avoid those taxes. People are driven by incentives, and that is why people work. Work is not typically considered ‘fun,’ but by being paid, people are provided an incentive. If you put taxes and tax codes in place that limit people, they will find a way around it. It is human nature. So instead of just dancing around taxing the wealthy, why not just fix the tax code? Washington has become littered with legislators instead of people with common sense, but I HOPE that CHANGES.