Democratic Sens. Charles Schumer (N.Y.) and Bob Casey (Pa.) are introducing legislation today that would impose strict penalties on Americans seeking to renounce their citizenship to avoid paying taxes, like Facebook co-founder Eduardo Saverin.
Saverin, whose Brazilian-born family sought asylum in the United States when he was a child, has relinquished his U.S. citizenship. Critics have suggested he renounced his citizenship in order to avert paying significant tax payments he would owe the government after Facebook goes public tomorrow.
“This tax avoidance scheme is outrageous. Saverin has turned his back on the country that welcomed him and kept him safe, educated him and helped him become a billionaire. This is great American success story gone horribly wrong,” Schumer said. “Eduardo Saverin wants to ‘defriend’ the United States of America just to avoid taxes, and we aren’t going to let him get away with it.”
Schumer and Casey insisted that the legislation is not directed at Saverin specifically but addresses an issue that has existed for a decade. Schumer indicated that about 3,000 people over the past decade have tried to denounce their citizenship to avoid U.S. taxes. Saverin currently resides in Singapore, a country that does not have capital gains taxes.
The proposed Expatriation Prevention by Abolishing Tax-Related Incentives for Offshore Tenancy (or Ex-PATRIOT) Act would forbid any person who relinquishes citizenship for tax purposes and has in excess of $2 million net worth from returning to the United States. The person also would face a 30 percent capital gains tax on any future American investment regardless of where he or she resides.
Schumer and Casey indicated that the “burden of proof” would be on the individual to prove that they had not given up their American citizenship for tax purposes to be exempt from the bill’s purview.
Saverin has denied that a desire to dodge capital gains taxes is the reason behind his change in citizenship, telling the New York Times recently that he filed to give up his citizenship in January 2011, long before the Facebook IPO was announced.
“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.