Senators want to stop Facebook co-founder from dodging taxes
WASHINGTON — Two senators on Thursday denounced Facebook Inc. co-founder Eduardo Saverin as a tax dodger for renouncing his U.S. citizenship ahead of the company’s initial public offering and introduced legislation to punish him and others who leave the country to duck big tax bills.
Among the penalties would be a ban on reentering the United States for anyone that the Internal Revenue Service determined renounced citizenship to avoid paying taxes.
“This is a great American success story gone wrong,” Sen. Charles Schumer (D-N.Y.) said. “Mr. Saverin wants to de-friend the United States just to avoid paying taxes, and we’re not going to let him get away with it.”
Schumer said Saverin could save $67 million to $100 million by renouncing his citizenship and moving to Singapore, which has no capital gains taxes.
So Schumer and Sen. Robert Casey (D-Penn.) said they will introduce the Expatriation Prevention by Abolishing the Tax-Related Incentives for Offshore Tenancy Act, also know as the Ex-PATRIOT Act.
Any person with a net worth of $2 million or an average income-tax liability of at least $148,000 over the previous five years who renounces U.S. citizenship would be presumed by the Internal Revenue Service to have done so to avoid paying taxes. The person would have to prove otherwise to the IRS.
Anybody who could not prove another reason for renouncing citizenship would face a 30% tax on future capital gains on U.S. investments and be barred from receiving a visa to reenter the country.
“Under current law, Mr. Saverin would get away for free. But Sen. Casey and I have a status upgrade for him — pay your taxes in full or don’t ever try to visit the U.S. again,” Schumer said. “The despicable trend that Saverin exhibits must be stopped dead in its tracks.”
In his first comments on the controversy, Saverin told the New York Times on Wednesday that his move “had nothing to do with taxes.”
“I’m not a tax expert,” he said. “We complied with all the known laws. There was an exit tax.”
But Schumer and Casey said they believed Saverin renounced his citizenship to save millions in tax payments from his share of Facebook stock. They said his move was even more galling because Saverin came to the U.S. as a boy because his family feared kidnappers in his native Brazil.
“I think it’s clear to anyone looking at this across the country that this is an insult to the American people,” Casey said. “When you have someone in Mr. Saverin who benefited tremendously from our education system, from our free-market capitalism, from all the liberties and freedoms we enjoy, and then to take that wealth and try to avoid taxes in this manner I think cries out for some basic justice.”
The Constitution prohibits Congress from passing laws specifically aimed at one person, what’s known as a bill of attainder. But Schumer and Casey said their proposal, while inspired by Saverin, is not limited to him and therefore would be constitutional.
A 1996 law allows the attorney general to bar anyone from reentering the country who renounced U.S. citizenship to avoid paying taxes. But Schumer said there is no mechanism for the attorney general to determine that tax avoidance was the reason for renouncing citizenship.
In 2011, 1,780 people gave up their U.S. citizenship, up dramatically from 235 in 2008, he said.
But because of the law’s loophole, nobody has ever been barred from reentry for tax avoidance. The Ex-PATRIOT Act would close the loophole by giving the IRS the authority to make that determination and share the information with the Justice Department, the lawmakers said.
“I am proud of all the people who made a fortune in Facebook. That’s the American way,” Schumer said. “None of them are renouncing their citizenship to avoid taxes.”
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