Senators want to block Facebook’s Saverin from reentering the U.S
venturebeat.com
venturebeat.com
Quasi-related tax rant: I am not a US citizen, but I live here. I want to get a green card (the process for that is another rant entirely). If I get one, I will owe tax on my earnings in any country. Earn £20,000 in the UK? Well, the UK gets a tax cut of that. Oh, and so does the US, for reasons unknown. America is the only country that does this, as far as I know.
In general you have to either live in a country that doesn't have a tax treaty with the US or not pay taxes on your income in the country in which you reside.
http://www.irs.gov/publications/p54/ch03.html#en_US_2011_pub...
Ah..it's election year
I would like to remind all the wannabe rich on HN who believe that one day they will be in his shoes, nobody succeeds alone and your success has a price for the country. For example in the case of Facebook there are more infrastructure costs for the whole internet, additional regulations have to be passed, etc...
PS: Ghostery on Venturebeat: 17 spying widgets found... Not going on that website ever again.
Isn't that what they are trying to do?
>Do we punish profitable corporations who pay no tax? Of course not; they're abiding by the laws.
Maybe we should change this law too. Especially in a political environment that is supposed to be doing everything it can to support small businesses. It takes a certain sized corporation to be able to funnel their earnings through Ireland (for example). Makes it hard to compete for the little guy.
No they are not. They are trying to skim money out of someone who worked his ass off and when it is time to get paid, he is being shortchanged.
He's not being shortchanged; he's done nothing to earn this money.
Actions that you take legally must have consequences too, as long as these consequences are legal the thread of legality has been preserved along the way. It's not a punishment, it's a consequence. I am not born in the US, thus I don't have the right to be the US President, is it a punishment ? No it's simply a consequence.
I would love all people that say that we need to "fix" the tax system instead of making "rich go" to take a step back and get out of their simplistic views. The tax system and a state is infinitely more complex than any company you could imagine. The worst part is that a country sets its own rule and thus has way more responsibility. Moreover higher instances require a state to behave a certain way and prevent certain behaviors. Even worse, external entities such as foreign countries can interfere with internal regulation mechanism (that's what's happening in this case).
The US being a relatively free state cannot prevent any body to abandon a nationality and thus to lower their tax. For most it's an important procedure which allows you to forfeit other nationalities and take a nationality that requires you to have no other nationalities( some countries impose that). Tax evasion is a constant battle because the laws have to guarantee cases like the one I mentioned but they are also used to save money. Thus legislator are constantly fighting a war against tax evasion and this is one example.
Again, your success has a burden on the whole community and we have to pay it. I know why it's so hard to understand here, many of you who see themselves as future entrepreneurs are thinking "Oh gosh, it's going to happen to me one day, I don't like that" and want to fight against it, but really try to see vastness of the complexity of the problem. There is no simple fix.
edit: Changed the phrasing
Could you explain this statement? Specifically, what is the price of Saverin's success that is paid for by the rest of us?
The normal justification for taxation is that they pay for public services, e.g. roads and police. Saverin is no longer consuming those services. Why should he continue paying for them?
As for why he should continue to pay for services he is no longer using? Well, to me his current money is a kind of deferred income from the years he was in the US. He earned his billions while he was at Harvard, and then later while he was in the US. The income wasn't realized until later, because that's how startups work.
I see this as a completely different situation from an American who leaves the US, takes up residence in Canada, earns a salary in Canada, pays Canadian taxes, makes investments as a Canadian resident, etc. This was a situation where someone actually earned the wealth in the US, as a US citizen.
IMHO the deferred argument is bogus, it's not like he could have pocketed then but decided not to. Whatever valuation Facebook will get tomorrow is, well, tomorrow's valuation.
Was attending Harvard free? Don't think so
> The income wasn't realized until later, because that's how startups work.
so would a founder get some money back if his startup bombed and he lost his money? Or is all the downside on him while the upside must be shared?
I have no idea. I don't think the government provided him with a free apartment or car either. It's not really central to my argument. My point is that he earned this money while living in the United States as a citizen of the United States, even if he didn't realize the gains until later.
so would a founder get some money back if his startup bombed and he lost his money? Or is all the downside on him while the upside must be shared?
This is pretty much how taxes work. You generally pay more in taxes when you make money than when you lose money.
EDIT: One thing I would say - if he has legally paid his taxes, then I don't think he should be barred from re-entry into the United States. I may not like the strategy, but I don't see how you can be accused of having renounced your citizenship for the purpose of avoiding taxes if the US imposed an exit tax on you and you paid it!
This is irrelevant to the question of Saverin paying individual income taxes. Any foreign investor gains these benefits and pays for them via corporate income taxes and the like.
Should all foreigners who make investments in the US be subject to US income taxes? If not, then this argument is moot.
I would consider stock that was earned while working in the US to be income earned in the US, even if they don't become valuable and aren't exercised until a later date.
His actions provided massive value to the US, creating an enormous amount of wealth that did not previously exist and adding to the nation's assets.
Far from exacting a price on a community, his actions have paid off quite handsomely for the community.
Nobody likes paying taxes, but I'm not radical enough to believe that someone who becomes a billionaire while working and living in the US as a US citizen shouldn't pay US taxes. Almost nobody does - it's the tax rate that people really disagree about.
What that rate should be is, of course, open to debate, but I don't really see it as central to this particular argument. I think this is more narrowly about the extent to which the money Saverin made from facebook should be considered money earned in the US as a US citizen.
1. By renouncing your citizenship you put yourself in an extra-legal position.
2. The laws are perceived as underdeveloped. That's why the situation has attracted the attention of US senators.
I once visited the US on business and left without purchasing anything more than a meal. If every action must have consequences, what consequences would you suggest for my actions? Perhaps I should be banned from re-entering the US since I didn't contribute significantly enough to the US economy while I was there?
You mean consequences to actions that he took legally ?
Only winner here is Singapore, with a tax policy that makes way more sense than United States tax policy.
Deport all the Senators, then the House Reps, then all of the judges, the President, Vice President, and then start on the rank-and-file bureaucrats... Oh, how I long for that day.
This goes on frequently within the US, too. A friend of friends made north of $100m in the dot-com bubble on a company that later collapsed. He made his money in SF, but bought a house in Nevada so that he could dodge the California taxes.
It may be legal, but it was a douchebag move, the moral equivalent of going out for a meal with a big group and sneaking out before the check arrives.
This section of the 1996 Immigration law, known as the Reed Amendment, added ex-citizens to the list of other “excludables” which includs practicing polygamists, international child abductors, and aliens who have unlawfully voted in U.S. elections."
Avoiding taxes by moving after the fact is an asshat thing to do.
No it isn't. Avoiding paying taxes is the Right Thing To Do. The idea that taxation is just or right is rooted in some ridiculous ideas, like the notion of an "implicit contract" which is a total oxymoron. Contracts are explicitly, well, explicit. The idea that someone drew some lines on a map, gave that area a name and created something called "government" and now have some authority to collect money from anybody who happens to be inside those lines is absolutely absurd.
That you find something absurd isn't proof that it's a bad idea, or that it doesn't work, or that you can just pretend your fantasy world will be awesome. I think it's absurd that we genius beings of ethereal light and wisdom are implemented on top of leaky, decaying bags of meat. But that's how it works for now, and denial isn't going to make my life any better.
No, but it's still a bad idea.
and denial isn't going to make my life any better.
So work on changing the situation. That what I do vis-a-vis my issues with the way American society is implemented. At least with this stuff, we have tools at our disposal to try and actually change things: running for office, volunteering for campaigns, donating money, spreading the word about better ways of doing things, etc., etc.
The USA requires you to get permission before renouncing. Part of the process of getting that permission is being audited by the IRS to make sure you're up to date on your taxes, and paying an excise tax on the money you're taking out of the country.
The clause you're referring to is for people who sneak money out of the country and then trick the US into "letting" them renounce where the US thinks they are up to date on their taxes but they aren't because they hid the money. There's no evidence he has hid any money, and no evidence that he has renounced to avoid paying taxes.
Unlike most countries, the USA taxes citizens on their worldwide income, no matter where it is earned or where they live. This means that unless you want to be paying taxes to the USA for money earned outside the USA for businesses outside the USA, you have to renounce.
Further, if he sold all his Facebook stock before giving up citizenship, he's already paid taxes on it. If he has kept that stock, then it is still the stock of a US company listed on a US exchange and after it goes public, he'll still have to pay taxes if he sells any shares-- just as any non-US citizen who owns stock on an american exchange does.
I can't see any evidence that he's avoided any taxes by leaving--- except taxes on income he produces outside the USA.... and why would the US have any right to that income anyway?
Not quite. Saverin played a major part in cooking the meal (using your analogy) and deserves his fair share of sneaking out before the check arrives. Heck, he should be paid for making the meal and a thank you!!
It's like trying to leave the dinner party and leaving $40 when your meal added up to $43.25 before tip and tax.
Also, you misunderstand restaurants in the same way you misunderstand economies. The guy who chops the vegetables in the 3 months after the restaurant opens should certainly be paid and thanked. But his job only exists because of heavy investment by the restaurateur.
And that sous chef should still pay his taxes just like everybody else, because restaurants are heavily dependent on civic infrastructure.
The issue in question is whether the sous chef, after leaving the US permanently and renouncing his citizenship, should pay taxes to the US on his investments above and beyond what any foreign investor would pay.
Saverin did pay his taxes just like everybody else. The question is whether he should now pay taxes above and beyond what other Singaporeans are obligated to pay.
If he has indeed paid all the tax on the Facebook lottery winnings, then I don't have a problem with him renouncing his citizenship. But I've seen estimates that he saves $100m by doing this, and I presume that's because he still has the stock.
It may not be illegal, but it sure is disgusting.
Also, having renounced his citizenship and already given up his U.S. residency, he is no longer subject to the protections of the U.S. constitution.
Don't we all want to pay less tax? If there was a legal loophole would you do it?
I mean, they made their money in the US, not just do they use the infrastructure, but also take money from American people directly.
Now they want to send the money out, and help other countries to start businesses and create jobs?! They might as well live in those 3rd world countries themselves, forever!
http://www.uscis.gov/ilink/docView/22CFR/HTML/22CFR/0-0-0-1/...
The USA requires you to get permission before renouncing. Part of the process of getting that permission is being audited by the IRS to make sure you're up to date on your taxes, and paying an excise tax on the money you're taking out of the country.
The clause you're referring to is for people who sneak money out of the country and then trick the US into "letting" them renounce where the US thinks they are up to date on their taxes but they aren't because they hid the money.
There's no evidence he has hid any money, and no evidence that he has renounced to avoid paying taxes.
Unlike most countries, the USA taxes citizens on their worldwide income, no matter where it is earned or where they live. This means that unless you want to be paying taxes to the USA for money earned outside the USA for businesses outside the USA, you have to renounce.
Have you heard of the sales tax? You might have come across mention of it somewhere. I'll give you a hint. It's around 9% in CA, depending on where you live.
I think the senators are taking this personally. More than 'He didn't pay the tax' this is about 'Does US no longer matter that people are renouncing citizenship?'
The fact is rest of world thinks they don't need US or go to US to do big things, anymore. That is something for the Senators to think about.
I really don't think we could survive another attack on the order of Facebook!
You could argue that what he's doing now amounts to insider trading.
Now he's a citizen and resident of singapore. He's got a couple investments there. But your claim that he owes the US taxes on what he built in the USA would seem to no longer apply, right? Since he's building the next thing in singapore, wouldn't he owe singaporean taxes?
If he didn't renounce, the US government would be taxing him on the money he makes in Singapore on a singapore business as well. Even though he's no longer benefiting from the "services" provided by the US government.
The US is unusual in the fact that it taxes citizens on their worldwide income. Further, it imposes fairly onerous reporting requirements that make it difficult for US citizens who live outside the USA to conduct business.
Just because he spent 10 years here, doesn't mean the US really deserves a cut of everything he makes for the rest of his life. This is why there's a renunciation process, and he has gone thru that process legally.
I don't think anyone is claiming he has not complied with the law. They're saying that if he wants to renounce citizenship, he must also renounce the benefits of being in the US. If that's truly his intention anyway, then he has nothing to worry about, right?
I'm sure that even if this happens he's not going to shed many tears. If he wants to see his family, they can just meet somewhere else.
The IRS themselves disagree with you on that statement.
http://www.irs.gov/publications/p54/ch04.html#en_US_2011_pub...
Thus the only thing to be upset about is that we have a person who has the ability to produce a high income for himself that the USA can no longer tax.
A far more equitable solution to the Saverin 'problem' would be to apply CGT to ALL US-derived gains. Most countries do this. But that is unlikely to happen as it would reduce foreign investment...
If not, what difference does it make that the Brazilian resided in the US for some period of time?
Note that the corporation is still paying US taxes by virtue of being physically located in the US. The issue is whether the investor should pay additional individual income tax on top of that.
How is it reasonable? What exactly is the USA gaining by this action? How is this making life better for the citizens of the United States?
This is just political bullshit, nothing more, nothing less. The Senators involved are far more harmful to the USA than Eduardo Saverin ever will be.