Let’s see. You come to America to go to a university paid for by your parents. You invest a bit of your parent’s money in a pre-startup. You get American citizenship. You make huge money by no fault of your own. You renounce your American citizenship and leave. You save taxes and laugh all the way to your private and secret offshore accounts in an authoritarian tax haven, without ever looking back.
What does this say about individual responsibility and U.S. international tax policy?
To say that Saverin’s renunciation of his citizenship to save on future capital gain taxes is mere ingratitude is a vast understatement. This action represents such an outrageous act of tax avoidance (evasion?) that the Congress should promptly remedy.
The solution is easy. You make money in the United States. This is U.S. source income. Your assets (your stock) are U.S. issued and registered. They are transferred to you in the U.S. for your investment and services in the U.S. Therefore, wherever you go and whenever you sell it, profits should be subject to the same taxation if you had not renounced your citizenship. Isn’t this an equitable and honorable way of doing business?
Whatever happened to corporate responsibility and individual citizenship? This form of global rootlessness to evade taxes calls for rethinking existing global governance. A better national and international architecture is needed.
This grievous tax avoidance by a co-founder of Facebook is another nail in the coffin of those denying the dire need for corporate tax reform especially when it comes to international taxation.
By the way this is not really even an issue of international taxation. Here you have an American citizen scheming to do away with taxes to both the federal government and state government during the Great Recession, by moving to a small authoritarian state with a predatory tax system that scoops up capital from countries worldwide.
The lack of transparency and bank secrecy of Singapore is notorious. For the U.S. to allow this to happen further promotes a dysfunctional international tax arrangement that distorts global and domestic business development. The U.S. is already combating secret offshore accounts and tax havens. Just ask the Swiss government and UBS.
It’s about time the United States addresses its own laws and administrative actions more forcefully to reign in a global system harmful to all countries and their peoples. The I.R.S. and Congress need to look at this closely and take aggressive action. More effective tax and banking agreements need to be negotiated. Domestic laws need to be better enforced and updated.
This situation accompanying Facebook’s IPO is indeed a moment in time where a personal choice should spark a public debate. Hopefully, this debate and an effective public policy response will be forthcoming from the U.S. and other countries.