Facebook co-founder renounces US citizenship pre-IPO Eduardo Saverin, a co-founder of Facebook, has abandoned his American citizenship ahead of the social networking company's possibly oversubscribed IPO in May. “Eduardo recently found it more practical to become a resident of Singapore since he plans to live there for an indefinite period of time,” his spokesman Tom Goodman …
...spending money that other people haven't even earned yet!
One upon a time it was bribing the electorate with their own money. Now they are bribed with borrowed money. Which was fine so long as whichever way the vote went the goverment got in, and goverments the power to grab the money...
but in these can't pay, won't pay times...
>> as P.J.O'Rourke succinctly put, "to punish success and reward failure"
That would be true if those earning £20,000 paid 10% tax (take home £18,000), £50,000 65% (£17,500) and £100,000 83% (£17,000). That would punish success and reward failure - if earning £20,000 PA were considered failure.
Any scheme where the percentage of tax increases and the amount take home still increases is more akin to 'lessening the harm of failure by reducing the rewards of success'.
Where I take issue with it is, if everyone were to pay a fixed amount (i.e. cost of public expenditure divided by number of public) then someone on minimum wage would probably come home broke after working 70 hours a week at minimum wage. Okay, perhaps I'm plucking exaggerated figures from the air... but the point stands that I reckon companies can only get away with paying only minimum wage because they are subsidised by the tax system.
Say what you want about capitalism and greed (it's really greedy to not have money you earned forcibly removed from you? So stopping a robbing is greedy now?).. but what does it say about society that instead of appreciating it when people give to the needy out of the goodness of their heart (yes, that really still happens!), that when we see successful people we immediately want them to be forcefully robbed to help out those less fortunate?
If that's the case, then why would anybody take chances or even take the effort to build a company? Some people live in poverty just to try and build a business so that in the future they could provide a better life for them and their family. Why go through all that knowing that if you ever make it, somebody else will just come along and make you give it up anyways? How is that right to you? Maybe instead of hating him for his success, you should go do it yourself!
Don't forget that the US is the only major western country that taxes its citizens on worldwide income regardless of whether they are resident in the country or not.
By renouncing citizenship he is still liable for the capital gains tax on any windfall he gets from the IPO, but is not liable for tax on income he gets from investing his cash-pile. In renouncing his citizenship he has renounced his rights to US healthcare and other services. What he has done seems totally reasonable. If he was, say, British, and about to make a huge wadge of money from a British IPO he could achieve the same thing just by moving overseas for a few years, without the renouncing citizenship part.
"What an unpleasant streak of bile-fueled ignorance. I think you summed up your position perfectly when you said "The problem with capitalism is that it's not about what you have; it's about what other people have".
Stow your faux-socialism until you have your facts straight."
Actually, it makes sense. Pure capitalism is all about leveraging your own wealth so as to get more back from others. Economics is, at its heart, the sciences involved in the distribution of a finite quantity: wealth (since wealth is based on matter, and matter is finite--ask any physicist--therefore wealth is finite, too). Economics NECESSARILY involves the transfer of wealth, and these transfers must necessarily be from one party to another. What differs is the methodology. So for capitalism, socialism, communism, whatever, it's ALL about what you have in relation to what other people have. It's what determines what happens to that stuff.
"Economics is, at its heart, the sciences involved in the distribution of a finite quantity: wealth (since wealth is based on matter, and matter is finite--ask any physicist--therefore wealth is finite, too). Economics NECESSARILY involves the transfer of wealth, and these transfers must necessarily be from one party to another..."
You're in luck, I'm a physicist who minored in resource economics. Your premise strikes me as false inasmuch as general economics isn't a zero sum game. Consider two markets, the stock market and the commodities market. The commodities market is a zero sum game where on person's gain are necessarily the loss of another, as there are only so many barrels of oil, pork bellies, etc. at a given time. Contrast this with the stock market which is not a zero sum game and aggregate wealth can be created and there needn't be any losers because it isn't based on "matter" but on another concept more commonly associated with "utility".
Certainly it may appear that the stock market is based on matter since every fule knows that the price of AAPL is based on how many bits of matter known as iP"odd" devices that Apple sells. That would be true if there wasn't any value, in the form of utility, added to the materials that constitute an iP"odd" in the same way that the commodities market works, pork belly in = pork belly out. It's that added value that doesn't come from "matter" that makes it different and yet it is the same inasmuch as it comes from energy in the form of labor, electricity and heat (that's blood, sweat and tears to you and me). How convenient it is then that you should bring up physics where we know that matter and energy are interchangable. Here we come to a rub since a fair deal of human energy comes from the sun via nutrition from vegetation, for you obligate carnivores that is regardless of whether rabbits eat it first (aside; preferably served with a nice sangiovese), and for practical purposes the sun's energy may as well be unlimited since when it goes dark the point rapidly becomes moot.
Should we find a way to shuffle off this terran coil what I'm uncertain of is that energy, and therefore matter, is limited and, lest this digress into a dissertation as to whether the universe is endothermic or exothermic and all hell breaks loose or hell freezes over, this should be left to another day.
"Contrast this with the stock market which is not a zero sum game and aggregate wealth can be created and there needn't be any losers because it isn't based on "matter" but on another concept more commonly associated with "utility"."
There, I call false on your claim of falsity. Wealth isn't really CREATED--it's FOUND. Like petroleum. Its wealth value was always there, but someone had to locate it underground first and then figure out how to refine it into useable fuel before its value can be tapped. People invest in new technologies in exchange for a share of this value should it work out.
"Wealth isn't really CREATED--it's FOUND. Like petroleum. Its wealth value was always there, but someone had to locate it underground first and then figure out how to refine it into useable fuel before its value can be tapped. People invest in new technologies in exchange for a share of this value should it work out."
So we agree that petroleum is a commodity, good, it's a start. I won't say the "Mona Lisa", "Venus de Milo" or "Statue of David" wasn't always there and just needed to be found by the artist because it's really immaterial to the discussion. The problem is that you're not even recognizing a rather large sector of the economy, services. In service sectors absolutely nothing is found as it is based on the utility people derive from the services, in either free time, a particular expertise, a pleasant atmosphere or whatever else. Perhaps it's having someone tend to the lawn or a night out at a restaurant on Mother's Day. I see how it gets confusing but once you figure out quickie take out food joints first sell convenience and the food is only for differentiation, it becomes a little clearer.
Case in point, one of the wealthiest people I know is a school chum who was waiter for 20+ years but he didn't "find" a plate of food and decide to sell it for $37.50. He just provided a level of service that was beyond the expectations of nearly everyone and retired in '07 at 39 years old, bought a boat big enough to live on and moved to Belize. He didn't find anything, he made it.
It depends on what you consider "fair"
If there was a flat tax and everyone paid eg £1000, then someone who makes a million and someone who makes £10,000 pay the same exact amount of tax. A lot of people consider that unfair, enough people that society taxes as a % of income rather than an absolute amount.
However I wonder if it really is unfair. Lets flip it round. Lets say you go to fill up with petrol and they charge you more because you earn more. People earning £10000/year only have to pay £1/litre for petrol whereas if you are earning over £20000/year you have to pay £2/litre.
I imagine in that situation a lot of people would suddenly find the idea of proportional deductions "unfair". Imagine if the person in front of you in the queue can buy a mars bar for half the price you must pay.
Nevertheless generally society thinks %s are fairer when it comes to tax. If two people are taxed at 30% they both lose 30% of their income. On the otherhand the person who earns a million is more paying a higher absolute amount of tax. eg £300,000 while the lower income person on $30000 is paying just £10,000. Is that fair?
Well society goes further doesn't it. The %s even increase for higher earners, so that guy earning 1 million might have to pay 50% on it, whereas the other guy pays 30%. So even proportionally the guy who earns more is paying more.
Some people think this is all fair, but really if it was a board game and the rules were like this, or TVs cost a lot more for rich people than poor people, people would complain. The reason tax works as it does I think is mainly for practical reasons - higher rates for richer people gathers more tax. The reason that's tolerated is that rich people are a minority. The poorer (relative) masses tolerate it. Some of them even advocate it, as a lot of people have this sense that it's fundamentally unfair that a single parent with kids should earn a lot less than a single business person with no dependencies.
The original flat fee approach was recently attempted in the UK, as the "Poll Tax". Poll taxes have a very, very bad reputation.
The problem with flat Poll taxes is easy to work out if you consider the issue of "disposable income". For the sake of argument, let's assume there are no other deductions, such as National Insurance:
Taxpayer 1 makes £20K / year. Poll tax is a flat fee of £1000. That leaves Taxpayer 1 with £19K after tax. Subtract the costs of living: a car (say £100 / month, including fuel), a mortgage (say £800 / month), two kids (say £500 for food, clothes, etc.) That leaves Taxpayer 1 with just £180 or so per month as disposable income to spend on anything else, including his savings.
Taxpayer 2 makes £200K / year. Poll tax is a flat fee of £1000. That leaves Taxpayer 2 with £199K after tax. Subtract living expenses: an expensive car (say £250 / month, including fuel; we'll assume he's into Chelsea Tractors); the mortgage will likely be quite high (say £2.5K / month). His kids, Quentin and Quentinella are spoiled rotten, so let's make that £10K / month on their private school fees, food, fancy clothes, etc.. That still leaves Taxpayer 2 with over £3900 per month as disposable income to put into savings and other luxuries.
Taxpayer 3 makes £2 million / year. Poll tax is a flat fee of £1000. That leaves Taxpayer 3 with £1999000 after tax. Subtract living expenses: a very expensive car (say £2500 / month, including fuel; we'll assume it's a mid-range Ferrari as this isn't a billionaire we're talking about here) ; an expensive house in a posh part of London: say £10K / month. His two kids, Kensington and Chelsea, will be asking for the same toys and fancy schooling as Taxpayer 2's, but XBox360s and a flat screen TV will cost the same, as will the private schooling, so that's another £10K or so per month, but let's add a live-in nanny as well: £2166 / month. That still leaves Taxpayer 3 with £141,000 / month. Or, to put it another way: he still has about £1.9 million to play with each year. More than enough for that yacht he's had his eye on.
(You can assume that the income is combined across two parents if you prefer, or you can assume all three examples are "single parent fathers". It's the total income that matters in any case.)
As you can see, the wealthier you are, the less you have to worry about living costs, taxes, etc, and the more money you have to spend. Once you reach billionaire levels of money, your basic living expenses become little more than a rounding error.
A flat fee may be the most logical solution, as you're really just paying for a service provided by the government, but it is perceived as being "unfair" because those at the poorer end of the scale feel like they're paying more as a proportion of their income than the rich. And they'd be right.
The thing is, as a proportion of their income, the rich are paying proportionately bugger all for pretty much everything, so this isn't a particularly compelling argument when viewed objectively. As you've pointed out, nothing else is charged according to your earnings, so why should the services provided by a large organisation (like a national government) do so? The wealthy can afford to pay for their own private healthcare, private pension schemes, private education and so on, so they're hardly a burden on the State; why should they be required to subsidise poorer citizens too?
Nobody wants to be a billionaire because they like staring at the Queen of England's, or Benjamin Franklin's, face. They aspire to wealth because it means they never, ever, have to worry about where the next meal is coming from for either themselves, or their family.
Proportional (i.e. percentage of income) taxation really is fundamentally Socialist. It exists—and is tolerated—because it feels "fair", but it's also a lot more convenient and easier than fixing the many other problems that make it effectively impossible to impose a flat annual fee instead. I can think of a few solutions, but they'd require some serious socio-cultural changes. (E.g. making public transport free at the point of use. And that's just a small part of it.)
Not so. The "time-is-money" argument only makes sense when applied to income tax, and even then it fails.
In most countries income tax rate is graduated depending on how much you earn. For example a CEO ( in Ireland ) may be paying 52% income tax, while the min-wage guy pays 20%.
That would mean that the high earning CEO works for the government up to about 27 weeks per year, while the min-wage guy only works 10.
"I imagine in that situation a lot of people would suddenly find the idea of proportional deductions "unfair". Imagine if the person in front of you in the queue can buy a mars bar for half the price you must pay."
One problem is a certain quantity called the "cost of living". This quantity for a given area is fixed (as sustenance, shelter, and other requirements tend to be absolute rather than proportional to wealth). One main reason taxes are proportional is because tax burden butts up against the cost of living and thus places increased burden on those who make near and especially below the cost of living (the tax burden makes it difficult to afford a meal, IOW) whereas the excessively wealthy can be taxed heavily and still have more than enough to sustain themselves.
Another problem is that, in a way, wealth has gravity. The more you have, the easier it is to amass more of it (though monetary leverage, economies of scale, and so on). It's like a game of Monopoly or a poker table. Someone with the lead can leverage the lead to drive the smaller guy out, and eventually, someone will get all the money and end the game...unless something is there to redistribute the wealth and keep the game going.
“…person who earns a million is more paying a higher absolute amount of tax. eg £300,000 while the lower income person on $30000 is paying just £10,000. Is that fair?”
YES! IT IS!
Is it fair that the millionaire is still eating caviar after paying his tax, while the lower earner is eating beans?
If you work hard you deserve a decent standard of living. If your lazy, then expect to eat beans and shut up!
Honestly, you need to ask your parents just which lolly pop stick they got their values from.
This post has been deleted by its author
Since he's a foreign born national, the question is if he has a green card or actually went ahead and became a US citizen.
There are cases where people had dual citizenship and then renounced their citizenship as a way to dodge taxes. As well as US Citizens renouncing their citizenship becoming a citizen of another country as a tax dodge.
While one doesn't know what will happen when the IRS and lawyers get involved...
He still has to pay taxes on his stock, although he might be able to legally own US stock anymore anyway, which would mean he just threw away a couple hundred mil.
Similar thing happened to a co-worker of mine, moved to another country, but he only lost like $350, so not too big of a loss, payroll ended up giving him a 'performance bonus' to make up for it.
This post has been deleted by its author
I think the current rules are he has to pay US taxes for the next decade and I expect this to encourage congress to increase that 10 years. Maybe he will take some of that billion that the IRS will want to challenge the law that allows the IRS to tax non-residents non-citizens, many of which have no connection to the US at all and have no way to vote. Many overseas kids born to American parents were registered as a US citizen by their parents are now finding themselves breaking US laws by not sending the IRS a form every year and a cut of any income above $90,000.
Yeah, those merkins sure like to be taxed. Uh, sorry, tax others.
Seriously, as much as aggregate US taxation levels are far below what their lavish government spending would require, it is astonishing how greedy their citizens can be in taxing others who have dared leave the mothership.
So he doesn't have to pay.
By becoming a citizen of another country he has to pay their taxes. But the country he is planning on moving to doesn't have a capital gains tax. So when he sells his shares, he pays no taxes. Thus his move could be viewed as a tax dodge. Therefore the IRS could go after him.
It interesting to see what the IRS does...
I can see all the arguments for him doing it and if you can then why not, especialy given all the factors. But the way it's presented is that he is doing it soley to avoid TAX. Now he did well inthe company he helped build and in that will get a nice income, but if he had not of done well would he of stayed, would he of claimed support. So if he can say no to the reverse coin the moraly he is doing nowt wrong, but he wont be the first to of tried this approach and I'm sure there be means and ways for the TAX man to take his cut.
But hey, worst case because its more money than we mortals see in a lifetime it will be a case that he is able to haggle with the TAX man and pay less than us mere mortals. If its less than a few million your done for TAX evasion and have to pay fines and the full amount, over that you get to haggle and get off with nobody non the wiser.
Do I blame him - no, poor global TAX laws that are allowed to be in effect a subsidised product that had it been a physical product for consumers would incure many fines over monoplies etc. There to blame.
Good luck to him.
I bet he doesn't pay less than us.
All the stories in the newspaper about the rich dodging taxes. I bet, with a few exceptions, that most of them are still paying far far more tax over their lifetimes than we are. I bet some of them end up paying millions in tax.
I won't even earn millions.
I don't know about that. Look up a strategy known as "Buy, Borrow, and Die". For the richest people, most of their wealth is in pure investments. They make wealth by their assets appreciating, and most countries don't have a good system for taxing income from (unrealized, to use the financial term) asset appreciation if the asset remains intact (only if you sell the asset, then it becomes capital gains). To actually get money, instead of selling the asset they borrow against the asset. Loans typically aren't taxed, either. Finally, the debts are simply carried over until the person dies. The assets are then inherited and their values "stepped up" under the tax code, meaning if they're sold then, there is no capital gain and therefore no tax in their liquidation to pay off the also-carried-over debt.
Some of the arguments here demanding taxation seem a little strange to me. Some of the "socialist" arguments here are so irrational, it becomes tempting for me to dismiss the whole concept. One person's definition of middle class is easily another's definition of rich and wealthy.Hardly absolutes.
Are all of us who use pensions in the UK guilty of tax avoidance? I'm sure there are plenty of people in the UK who do not have the money to put into these "tax avoidance" schemes?
Exploiting loopholes and paying no tax for eg, can be described as immoral, but not illegal.
But renouncing citizenship, and its benefits, to not pay tax? Why the hell not? Freedom goes both ways, for the individual as well as the citizens. The rights of a commune do not supersede the rights and freedoms of an individual, especially when the individual no longer benefits or belongs to that commune.
Sometimes I think people are so fixated on what should be taken away, they forget what should be given up as well.
A question to those, from what I can tell, seem to advocate tax payments "if you can": when do you deem a government and its citizens to be greedy when it comes to taxation? Individuals aren't the only ones who can be greedy!
Obama and France's François Hollande both want to raise the taxes on the rich(?) so both of them should expect this to happen more often. Why should a person pay very high taxes when they can get citizenship where the taxes are lower?
... it doesn't give enough incentive for working, thinking and innovating. After a few years of this, with the exception of a few elites -political, scientific, military- , most of the population goes for the lowest common denominator, and everything stagnates and rots.
But the problem with Capitalism is that wealth and power tend to end in the hands of a few, who at some point in the game have enough power to lobby/corrupt the system for their profit. This process snowballs for some time, until The Powers That Be gain the ability to erode the middle classes until they almost disappear, killing in a single blow the biggest wealth producers, the biggest consumers and the biggest taxpayers (taken as a group). And then everything stagnates and rots. We are almost there.
And that's a reason why proportional deductions make sense. To help prevent too much power and wealth in the hands of a few. Also helping to give an acceptable standard of living to the population helps to prevent riots/coups/revolutions, something that most people -at least most people that shouldn't be threading baskets- considers a good thing. Similar arguments cold be made about a National Health System and a National Educative System.
I'd love to be wrong on this, but there are many chances that our grandchildren -most of them- end up living like serfs.
The icon? A flameproof suit! ;-)
For the last few years, the US has imposed an exit tax on unrealized capital gains if you have assets of more than $2M.
Therefore, anything he owns that has gone up in in value will be taxed at the US capital gains tax rate. What we don't know is what he declared his Facebook shares as worth. That will reveal whether he has ducked his obligations or not.
For some people with worth barely over the threshold, they may need to sell their house to cover their taxes. In addition, you must also pay gains based on currency movements between your investment currency and the US$, causing fluctuation in your net worth out of your control, that will probably never be realized.
My advice to US citizens is to renounce if you do not plan to work in the states or live there again, especially if you are currently under the threshold. Then it's just a matter of paying the fee to renounce, moving to a foreign country, acquiring citizenship of another country, making an appointment to visit to an embassy out of the country, visiting the embassy, waiting for at least 6 weeks during a period of reflection, and a final visit to the embassy to renounce.
Additionally, he also need to file tax returns for the next 10 years with the US as well, again because he's a high net worth individual. Have a look at US expatriation form and instructions F8854 to see what's really going on.
What's fair is not the issue, the rich avoid tax no matter what rate is agreed. 50%, 40% or even 10% makes no odds if they actually PAY 0%.
Anyway what annoyed me in the article was the obsequious language used by his spokesman "has found it more practical to live in Singapore".....
He's rich enough you think he'd have the guts to admit he finds it more lucrative.
It calls to mind a documentary I saw interviewing the droves of F1 Drivers who live in Monaco: only one of them was willing to admit the real reason they move there is the small matter of zero Income Tax.
The Register 
Biting the hand that feeds IT
Copyright. All rights reserved © 1998–2024
