I don’t know why I’m a tax geek. The topic just tends to irritate people.
Take Eduardo Saverin, for instance. The Brazilian-born, naturalized American citizen came to the United States when he was a child. Saverin reportedly was the reason his wealthy family settled in the Miami area; the 13-year-old was said to be a kidnapping target.
He eventually enrolled at Harvard University, where he met Mark Zuckerberg and became a co-founder of Facebook.
Now Saverin, currently living in Singapore, has renounced his adopted country.
He’s getting a lot of heat for the decision because of its tax implications.
Like thousands of other Americans who surrender ties to the United States, Saverin will avoid paying the Internal Revenue Service a lot of money. And we’re talking a whole lot of money as Saverin still owns around 4 percent of Facebook and is expected to pocket around $4 billion in the social media company’s upcoming initial public offering, or IPO.
Business, taxes or both
Saverin’s people say the tax savings on the Facebook IPO are ancillary.
Saverin made the decision in September 2011 to renounce his U.S. citizenship and move to Singapore. He chose the Asian metropolis, says a Saverin spokesman, because he plans to invest in companies from that country and other global firms exploring entry into the Asian market. So it makes sense to have Singapore as a base and to claim that city-state as his country of residence.
I don’t doubt Saverin’s business reasons for the relocation and U.S. citizenship renunciation.
But neither do I buy the story that taxes weren’t a motivation. Of course they were. This guy comes from a rich family, he’s rich himself and finding ways to hang onto their fortunes is what rich people do.
And criticizing them for taking advantage of legal ways to keep as much of their wealth as they can is what the rest of us poorer folks tend to do.
The unfair/fair tax dilemma
Why? Aren’t we all trying to do what Saverin is doing, to lower our tax bills? That’s why you read Bankrate tax stories. Heck, even the IRS tells us we should take every legitimate tax break to which we’re entitled to lower what we owe the tax collector.
But we get angry at how others, especially rich people, handle their taxes regardless of what they do.
Warren Buffett has been roundly criticized by many for saying he paid too few taxes because of the way the tax code applies to his investment earnings. It’s not possible to pay too little to the tax man, say incredulous anti-tax folks. If Buffett wants to hand over more to the U.S. Treasury, fine, but leave the system alone so that others who aren’t as upset by lower capital gains taxes don’t end up paying more.
In Saverin’s case, he won’t get off tax-free. When someone renounces U.S. citizenship, the soon-to-be ex-American must pay what amounts to an exit tax on the capital gains from their stock holdings, even if they don’t sell the shares. Of course, his future tax bills might well be lower, but Uncle Sam is getting a parting piece of Saverin’s wealth pie.
Still, people are taking it personally, saying Saverin owes it to the United States to keep his citizenship and pay his fair share of taxes.
What I want to know is, why don’t those bashing Saverin for his tax expatriate strategy apply that way of thinking to everyone else? Shouldn’t the same fair-share tax obligation argument apply to the rich Americans who are staying put?
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