Get out while you can and if you can?



http://thenewamerican.com/tech/computers/item/11391-facebook-co-founder-saved-big-money-giving-up-us-citizenship

Facebook co-founder Eduardo Saverin (left) is expected
to save hundreds of millions of dollars or more on his tax liabilities
after becoming one of the more high-profile individuals to renounce U.S. citizenship in recent years. The Brazilian-born multi-billionaire now lives in Singapore, where the government does not impose capital-gains taxes or take a cut of income earned abroad.


With social-networking giant Facebook ready to launch an initial public
offering (IPO) of its stock, analysts have estimated that the company
could be worth as much as $100 billion. That means Saverin, who owns
about four or five percent of the company, might be sitting on billions
of dollars’ worth of assets — a figure that almost certainly would get
the Internal Revenue Service (IRS) and the big-spending U.S. government
frothing at the mouth.

Of course, even by renouncing his
citizenship, Saverin and his wealth did not completely escape
Washington, D.C.’s clutches. The U.S. government imposes what is known
as an “exit tax” on wealthy individuals before it allows them to
permanently sever their ties to the “Homeland.” In the case of stocks,
according to experts cited in news reports, the IRS treats and taxes
them as if they had already been sold before granting anyone permission
to permanently ditch Uncle Sam.

While it remains unclear
exactly how much wealth the IRS seized from Saverin, tax experts say he
made a smart financial move by giving up his citizenship before
Facebook’s IPO. “Once it’s public you can’t fool around with the value,”
Reuven Avi-Yonah, director of the international tax program at the
University of Michigan’s law school, told Bloomberg. In the future, the benefits could be even greater as Saverin invests his wealth and it continues to grow.


A spokesman for Saverin did not dwell on the tax-liability issue when
contacted by reporters, offering mostly generalities about the decision.
“Eduardo recently found it to be more practical to become a resident of
Singapore since he plans to live there for an indefinite period of
time,” his New York-based representative said in a statement. Another spokesperson later claimed the timing had nothing to do with Facebook’s IPO.


According to the spokesman, Saverin plans to invest in Brazilian and
global companies with a particular focus on fast-growing Asian markets.
“Accordingly, it made the most sense for him to use Singapore as a home
base,” the statement said. The move will also allow the
multi-billionaire to avoid paying future U.S. taxes while ensuring that
his private financial information is not subject to complex IRS
reporting requirements — not to mention the massive penalties associated
with failing to totally comply, even inadvertently.

After the
news was reported by Bloomberg over the weekend, Saverin’s decision
quickly attracted a flurry of headlines around the world, shining the spotlight on the increasing number of
U.S. citizens opting to take the same route for similar reasons. Last
year alone, almost 2,000 people gave up their American citizenship — the
vast majority of them to avoid U.S. taxes as well as the increasingly
burdensome regulatory and reporting requirements imposed on Americans no
matter where they reside. And the trend of wealthy Americans getting out while they can is accelerating fast.


In 2011, more than twice as many Americans officially severed their
ties to the U.S. government as in the preceding years. This year is
expected to see record numbers, too. And as the Obama administration and
Congress continue stoking anxiety with class-war rhetoric even as taxes
on high earners are set to skyrocket, more and more people are
considering the option.

“It’s a loss for the U.S. to have
many well-educated people who actually have a great deal of affection
for America make that choice,” chief of global tax practice Richard
Weisman at Baker & McKenzie in Hong Kong was quoted as saying. “The tax cost, complexity and the traps for the unwary are among the considerations.”


The U.S. government is one of just a tiny number that taxes its
citizens no matter where in the world they live or earn money. U.S.
citizens abroad are also required to fill out stacks of byzantine IRS
documents disclosing all sources of income and all foreign bank
accounts. But instead of scaling back the nightmarish regulatory regime,
American authorities are taking it even further, ordering all foreign
banks and financial institutions to turn over information about U.S.
clients by 2013.

The tax situation has become so outlandish and complex that Americans have essentially become international pariahs,
according to experts who have been warning about the problems for
years. Countless banks around the world are now even refusing to do
business with anyone holding U.S. citizenship rather than submit to the
IRS’s onerous requirements.

Some Americans were sad to hear
that yet another billionaire had decided to cut his ties with Uncle Sam.
Others were outraged, calling for a boycott of Facebook despite the
fact that Saverin had a well-publicized fallout with founder Mark
Zuckerberg and is not believed to be much involved with the company
anymore. But at least Singapore was happy to have him.

“Saverin
making Singapore his home benefits the city-state in multiple ways.
Firstly, by investing in Singapore startups, Saverin has created
employment primarily for Singaporeans,” said
head of operations Satish Bakhda with Rivkin, a company that helps
establish businesses in the nation. “This is in line with the Singapore
government’s appeal for companies to create opportunities for the core
Singaporean workforce.”

Bakhda expressed hope that more
American entrepreneurs and investors would follow Saverin’s lead and
consider doing business in Singapore. “The United States could take a
cue from Singapore’s system and avoid further brain drain,” Bakhda
concluded, referring to a phenomenon that occurs when over-bearing
governments chase well-educated and productive people out of a nation.
“In the meantime, we are optimistic that our tax structure will compel
more people to relocate here.”

Despite being criticized as authoritarian in many regards, the city-state’s government has allowed an almost unprecedented degree of economic liberty that consistently ranks far higher than in the United States. In fact, a recent study
by the Heritage Foundation known as the Index of Economic Freedom
showed that Singapore is a close second place behind Hong Kong, while
the U.S. continues to sink deeper and deeper in the rankings — with the
plunge accelerating quickly under the Obama administration.


“Restoring the U.S. economy to the status of a ‘free’ economy will
require significant policy changes to reduce the size of government,
overhaul the tax system, and transform costly entitlement programs,” the
study‘s authors explained.
“By boosting growth in the private sector, such freedom-enhancing
policies are the best hope for bringing down high unemployment rates and
reducing public debt to manageable levels.”

On its current
trajectory, the U.S. government has shown no indication of reversing
course despite the disastrous and well-documented effects of
big-government policies on the economy. Instead, Congress mostly seeks
to spend more, tax more, and regulate more — it is also trying to export high taxes abroad. Incredibly, lawmakers are even working on a bill now that would trap Americans in the U.S. by revoking their passports over mere allegations of tax debts.


Experts say if something does not change soon, Americans will learn
their lessons about economic freedom the hard way. In the meantime,
countries like Switzerland, Australia, New Zealand, Chile, Mauritius,
Canada, and Ireland — all of which ranked higher than the U.S. in
economic freedom last year — will continue reaping the benefits of freer
markets.

Those nations might also benefit by attracting the
growing number of productive or wealthy Americans seeking new homes
under governments with more respect for liberty — along with the jobs
they bring with them. While it has not become a stampede for the exits
just yet, without significant reform in the near future, analysts say
the “brain drain” now starting to hit the U.S. will almost certainly
continue to worsen.