A Facebook co-founder’s ability to avoid paying an estimated $67 million in federal taxes by renouncing his U.S. citizenship isn’t sitting well with two sitting Democratic U.S. senators.
Sens. Charles Schumer and Bob Casey Jr. want to punish Americans who follow the footsteps of Facebook co-founder Eduardo Saverin, who turned in his citizenship badge and will avoid paying millions in taxes after the social networking site goes public Friday.
Bloomberg estimates that Saverin, already a 30-year-old billionaire who ranks No. 634 on Forbes’ list, will avoid paying $67 million in U.S. capital gains taxes because he became a Singaporean last September, well before this week’s initial public offering. Singapore doesn’t tax capital gains.
Schumer and Casey called Saverin’s relocation an “avoidance scheme” and want to re-impose taxes on expatriates and bar them from re-entering the country.
The plan would impose a mandatory 30 percent tax on future capital gains realized by those who have renounced their U.S. citizenship. It would apply to Americans with either $2 million in net worth or an average income tax liability of at least $148,000 over the last five years.
“Eduardo Saverin wants to defriend the United States of America just to avoid paying taxes,” Schumer, of New York, said at a news conference. “We aren’t going to let him get away with it.”
Facebook estimates its employees, many of whom will become instant millionaires after the IPO because of stock they already own, will owe the IRS at least $4 billion.
Although his original 34 percent stake in the company is now estimated at well below 10 percent after a falling out with Facebook, Saverin still owns a 2 percent to 4 percent stake that could be worth as much as $2.89 billion after the IPO, according to Bloomberg.
In an interview with The New York Times this week, Saverin defended himself as “a global citizen.”
“This had nothing to do with taxes,” Saverin told the newspaper. “I was born in Brazil; I was an American citizen for about 10 years.”
Saverin, however, won’t get away tax-free, according to Bloomberg:
Americans who give up their citizenship owe what is effectively an exit tax on the estimated capital gains from their stock holdings at the time of the renunciation. Saverin’s bill would be about $365 million, though even that can be deferred indefinitely until he actually sells the shares.
Facebook plans to sell it shares to the public as high as $38 apiece, which would value the company at as much as $104 billion. The stock is expected to begin trading Friday under the symbol “FB” on the Nasdaq Stock Market.