Grace Forms Blog

Back Tax Help, Facebook, & US Citizenship

Eduardo Saverin is in hot water with some of the political big dogs on Capitol Hill.  Senators Chuck Shumer and Bob Casey announced that they will be pushing a bill that keeps highly-successful expats from re-entering the US if they renounce their citizenship, since it will be assumed that it was done for tax reasons.  After all, a person does not need back tax help if they are not citizens.  Unless they can prove to the IRS that, no, they are not dodging taxes, but are like every other person who renounces their citizenship who is not wildly wealthy, then they will face not just prevention from entering the US, but also be subject to a 30% capital gains tax on any US investments made after renouncing their citizenship.

There’s only one problem:  Saverin does not have to pay back taxes, since he is current for the time in which he was a citizen, and has agreed to pay “hundreds of millions of dollars in taxes to the United States government…on everything I earned while a U.S. citizen,” to use his own words.  That means, even if the reasoning behind the two senators’ bill was valid (which it is not), they are still not going to be any piece of that big Facebook pie.  Some have wondered if this bill would mean that his Facebook fortune is subject to those taxes, but since Saverin renounced his citizenship prior to Facebook’s IPO, the government has no claim to any part of that.  Therein lays the problem for the senator.  Lots of money that they feel they could have had, but it slipped through their fingers.

And one has to pause and wonder, does the fact that wealthy producers are fleeing the United States serve to benefit anyone and does a high ranking member of the Senate demonizing such actions going to hasten the swift exit? With so many people looking for a quality back tax guide, it makes little sense for the senators to be so committed to getting this one person, who renounced his citizenship in January 2011, well before any talk of Facebook’s IPO were even considered.  One question to ponder is what rate would be high enough to take in revenue and at the same time low enough for those in the high income to stay in the country?

Making matters worse are those who think of countries with low tax rates as somehow undercutting the US and using the phrase “off shore tax haven” as a negative connotation. The facts are we are now a global society and never before has it been as easy to shop around to see which countries are most advantageous for maximizing one’s personal finances. Throw in those who can now do business via the internet and not locked into one geographical area and this flight is understandable. If someone in need of back tax help can do the math and see that the country of Singapore will fill their pockets at a higher rate than if they lived in Santa Monica, California and it is not a mystery as to why and how successful people make the decision to leave the US.  Particularly for those who have no emotional attachment to a state or a country, picking the best country in which to live is almost as blasé of choice as what toppings to order on your pizza.   We can either demonize and punish those seeking greener pastures-or make our own greener pasture right here at home.

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