Facebook co-founder Eduardo Saverin has come under increased scrutiny following news that he had renounced his U.S. citizenship to become a resident of Singapore.
The move drew criticism as reports pointed out that the move would save Saverin — who owns a part of Facebook — millions of dollars in taxes after the company goes public.
Saverin has denied that he is moving for tax purposes, and has said that his decision was based solely on his business investments.
On Thursday, Sens. Charles Schumer (D-N.Y.) and Bob Casey (D-Pa.) announced plans to introduce a bill to respond to Saverin’s move, which a news release from Schumer’s office called an “avoidance scheme.”
“The senators will call Saverin’s move an outrage and describe a plan to re-impose taxes on expatriates like Saverin even after they flee the United States and take up residence in a foreign country,” the release said, adding that the legislation would bar individuals like Saverin from re-entering the country.
Casey’s office said the bill is called the “Ex-PATRIOT” Act, which stands for the “Expatriation Prevention by Abolishing Tax-Related Incentives for Offshore Tenancy” Act.
Under the proposal, “any expatriate with either a net worth of $2 million or an average income tax liability of at least $148,000 over the last five years will be presumed to have renounced their citizenship for tax avoidance purposes,” according to a release from Schumer’s office, and they would pay 30 percent capital gains tax — the same rate as people pay in the U.S.
If an expatriate can prove he or she has a legitimate reason for renouncing U.S. citizenship, no penalties will apply.
The bill would tax any prospective gains an expatriate who has renounced his or her citizenship in the past ten years who did so for purposes of tax avoidance. In Saverin’s case, Schumer spokesman Brian Fallows said that if the Facebook co-founder liquidates all his holdings in the company before the bill is passed, he will escape penalty. However, if he takes his time selling off his assets, for the purpose of letting it grow and then seeks to sell off and he would pay 30 percent on those earnings.
According to Schumer’s office, 1,780 people gave up their citizenship in 2011, a rise from 235 in 2008.
In a statement, Casey said that actions such as Saverin’s are an insult to middle-class Americans. “We simply cannot allow the ultra-wealthy to write their own rules,” he said. “Mr. Saverin has benefited greatly from being a citizen of the United States but he has chosen to cast it aside and leave U.S. taxpayers with the bill.”
For his part, Saverin told the New York Times in an interview Wednesday that he first filed to give up his citizenship in January 2011, more than a year before Facebook filed its paperwork to go public. “I was born in Brazil, I was an American citizen for about 10 years. I thought of myself as a global citizen,” he told the Times.
According to the report, the citizenship switch became official in September, and was published in a government filing at the end of April. He told the Times that he had complied with all the known laws and that he paid an exit tax.
Saverin, who became a U.S. citizen in 1998, co-founded Facebook at the age of 21. Two years later, he left the company after a conflict over the company's direction and settled a suit with the company.
On Tuesday, Business Insider published an account describing how Zuckerberg ousted Saverin from the company. According to the report, Zuckerberg cut Saverin out by incorporating a new company in Delaware, which then acquired Facebook’s original LLC. Shares of the new company were then distributed, but Saverin’s were diluted to fewer than 10 percent.
Now, Saverin owns around 4 percent of the company, which is estimated to be worth around $3 billion.
Saverin has the reputation of being a playboy who enjoys an extravagant lifestyle, a characterization that he told the Times was not accurate.
“It’s a misperception, especially the playboy,” he told the newspaper. “I do have a Bentley. I do go out. I’d rather not go into personal details.”
When asked for comment on the Schumer-Casey legislation, Saverin’s spokesman Tom Goodman said, “We continue to tell the truth, which is Eduardo’s decision had nothing to do with taxes and everything to do with his desire to live and work in Singapore. He is a native of Brazil. People seem to be responding to perception, not reality, and that is unfortunate, to say the least. We are unequivocal in our position that taxes were not a factor in his decision.”