Secret Bitcoin billionaires to renounce their US citizenship before cashing in?
blogs.harvard.edu
blogs.harvard.edu
Most people surrendering citizenship aren’t doing so to avoid taxes. They are doing so to avoid double taxation.
A Bitcoin billionaire is either paying the US 15-20% capital gains tax or France, for example, 45-50%. Either way, Caesar still gets his due.
If you have the money, most of these countries offer great quality of life. If you're sitting on a $100m gain.. it's worth it. A change of scenery isn't always bad in life. Personally I would never voluntarily pay 20% on a massive gain if there is a legal way to avoid it.
I guess what this article is implying is, since the US treasury does not know of the existence of these Bitcoins, people can easily renounce (committing US tax fraud in the process) and cash in.
Not to mention the moral arguments in favor of paying the taxes you owe.
You can support promising artists, give grants to talented people, help people out who can't afford their medical bills, end up in a bad legal situation, etc.
alright
> moral arguments in favor of paying the taxes you owe.
woah, not so fast. There's no morality in blind obedience.
Most former British colonies have a similar system (in particular, Ireland, Malta and Cyprus) and (if you have a British passport) could make use of the system there, as you do not have your domicile in those countries.
See http://www.telegraph.co.uk/finance/personalfinance/expat-mon...
Or you could move to Malta for a tax year, and then move to the UK. It would be tax free as well. In my view worth doing if it's a sizeable sum.
Edited
It is a tiny city, but it has a massive role in Southeast Asia. I have lived there before and lived a great life without being rich by US or Singapore standards. The national language is English. They are by all means a capitalist country. It is a modern high tech society. Very western if you ask me.
The only way they aren’t that I can think of is that they are not a democracy.
It's people with $100k of bitcoin that are more likely to want to go through troubles to not have to pay taxes. Because having $100k and $50k in the bank could be very different living situations.
Except for one important detail: membership in the Three Comma Club :-). Purchasing power has long ceased to matter for these people: money is just a way to keep score in a game. It can be traded for equally pointless status symbols like bigger yachts, tropical islands, or (recently) Mars rockets. That bitcoin billionaire would much rather turn $500 million into dollar bills and set them on fire than let them be used to fix some of America's worn-out roads and bridges.
To be a Bitcoin billionaire, even a multimillionaire you had not only buy thousands of Bitcoin early on, you had to also:
- Hold when it was valued at USD10 (it was a milestone that generated a lot of buzz that it was a peak value)
- Hold when it was valued at USD100 (it was a milestone that generated a lot of buzz that it was a peak value)
- Hold when it was valued at USD1000 (it was a milestone that generated a lot of buzz that it was a peak value)
- Not lost the password of a negleticble amount of money stored as virtual currency that no one quite understood in a virtual wallet you are not sure where to keep.
- Not be hacked in several ways, included in the biggest exchange of the early days
Is anyone guess how many people are left after all that. My guess is that I would count in one hand
Of course someone could hope to stay off the radar or move to a non-extradition country and try to thumb their nose at the USG, but there's a big difference between a loophole existing and the fact that enforcement isn't always perfect.
My point was to point out that there isn't any loophole in U.S. that would allow a cryto billionaire to avoid capital gains taxes via the expedient of renouncing citizenship. People can try anyway and see what happens, but there's a non-zero risk that they'll be chased to the ends of the earth by the IRS and DOJ.
Also, this:
> His or her wealth is on a Post-It and nobody else knows about it. So the person who was clever enough to buy bitcoin in 2010 renounces in 2018, becomes a citizen of a country without income tax or one that doesn’t tax foreign holdings, and then starts cashing in without the U.S. government ever becoming aware.
Is pretty much a description of tax evasion. Crimes don't get canceled when you renounce citizenship. And the evidence of this crime is public and immutable.
If you're in this position, congratulations! Now just suck it up and pay the capital gains, since 80% of Lots Of Money is better than 0% of Lots Of Money. Life as a free-and-clear gazillionaire is going to be better than life as a fugitive from a powerful, spiteful tax agency.
But if the tax law says the gain event is selling the asset, then there is absolutely nothing morally wrong with exploiting this tax loophole.
It's a travesty that it exists in the first place (as it was when Apple exploits Irish law), but the laws are written by the government that no individual can control. If the laws create a loophole, it's legal (obviously) and ethical to step through it.
I'm Australian. I've lived in the US long enough now that I am treated as a US tax resident -- worldwide income, foreign assets, the whole shebang. I have to report and pay capital gains tax on my compulsory retirement savings in Australia, which I cannot transfer here or withdraw, because of an oversight in the US-Australia tax treaty.
Yes, it's absurd. But even in the matter of a few hundred bucks it is not worth messing with the IRS. There is too much to lose.
You have to pick your battles. Trying to sneak past capital gains tax illegally is bitpenny wise and pound foolish. If you don't like the tax laws, do what everyone else has to do and get elbow-deep into the messy, uncomfortable and morally challenging world of representative democracy.
Either way, I'll report and pay whatever my agent says is correct.
I still find it a little disconcerting I could renounce my citizenship and still owe taxes on things I sell years later. I get why (and in this case I feel it's largely moral), but that's quickly getting into big brother new world order level stuff. I feel it's enough "punishment" to lose the benefits of being a US citizen and holding a US passport. If the world ever goes to shit, those folks will have no place to turn for even basic human needs and protection. They will quickly find out what most of the world feels about carpetbaggers.
You owed tax at the time, is the point here.
> I get why (and in this case I feel it's largely moral), but that's quickly getting into big brother new world order level stuff.
FATCA in particular has probably done more harm than good.
But if you want to live in the US, if you want to spend significant time in NYC or SF or Dyersville, Iowa, then federal, state and city taxes are the price of admission. If you don't, then sure: consult a lawyer about your options. He or she will probably counsel to not commit tax evasion.
Having lived a good percentage of my adult life in countries where I do not have citizenship, it's something that I keep in mind -- I do not have the rights of a citizen. I only live here as a guest on the good graces of my host. Only international agreements with the country that I come from guarantees any due process of law in the case that there is trouble.
Having said that, I completely agree with you: it would be wonderful if countries would guarantee rights of people no matter their origin or political affiliations. We don't live in that kind of world, unfortunately.
It would be nice to be able to travel around the world without restrictions.
See the list with no or low taxes at https://flagtheory.com/tax-free-countries/
You can really go ~anywhere, example NL: https://ind.nl/en/other/Pages/Investing-in-the-Netherlands.a...
It requires a large initial deposit and proof of funds, but all foreign-sourced income is tax free.
Malaysia is very centrally located in SEA, has great weather year round, very modern, great food.
Chiang Mai was top of the list for a while (we have done most of the rest of Thailand), but considering the Thai Elite Visa does not give good ROI and burning season makes the North awful for 3-4 months of the year, Thailand is no longer a top pick. Also we have kind of outgrown it at this point.