Boehner Backs Anti-Saverin 'Ex-PATRIOT' Bill

By ExpatBriefing.com Editorial 23 May, 2012

In a television interview, the US Speaker of the House of Representatives John Boehner (R – Ohio) has surprisingly come out in favour of the bill introduced in the Senate which is aimed against those who renounce their United States citizenship to avoid paying taxes.

A political furore has erupted over the decision of Facebook co-founder and partial owner Eduardo Saverin to give up his US citizenship in order, it is being said, to avoid taxes on profits he expected to collect after the social-networking company recently went public. Saverin has lived in Singapore since 2009 and had dual citizenship, but then renounced his US citizenship in September.

By taking that action, he is reported to have avoided at least USD67m in taxes since Singapore, unlike the US, has no capital gains tax, and he will only pay a lower exit tax. The amount of his effective tax saving could increase even further if and when Facebook’s share price rises.

In response, Senators Charles E. Schumer (D – New York) and Bob Casey (D - Pennsylvania) unveiled their Ex-PATRIOT (Expatriation Prevention by Abolishing Tax-Related Incentives for Offshore Tenancy) bill, which would not only re-impose taxes on such expatriates, but would also bar those individuals from re-entering the country until they had paid their taxes in full.

“We simply cannot allow the ultra-wealthy to write their own rules,” said Casey. “Saverin has benefited greatly from being a citizen of the US but he has chosen to cast it aside and leave US taxpayers with the bill.”

“Saverin has decided to ‘defriend’ the US just to avoid paying his taxes. We aren’t going to let him get away with it so easily,” Schumer said. “It’s infuriating to see someone sell out the country that welcomed him and kept him safe, educated him and helped him become a billionaire. There should be no financial gain from renouncing your country.”

Under the Senators’ proposal, any expatriate with either a net worth of USD2m, or an average income tax liability of at least USD148,000 over the last five years, will be presumed to have renounced their citizenship for tax avoidance purposes.

The individual will then have an opportunity to demonstrate otherwise to the Internal Revenue Service (IRS). If the individual has a legitimate reason for renouncing his or her citizenship, no penalties will apply. But if the IRS finds that an individual gave up their passport for substantial tax purposes, then it will prospectively impose a tax on the individual’s future investment gains, no matter where he or she resides.

The rate of this capital gains tax will be 30%, in keeping with the rate that is already applied on non-resident individuals for dividends and interest earnings.

The Ex-PATRIOT bill would also improve current law to ensure such an individual cannot re-enter the US after renouncing his or her citizenship, so long as the individual avoids these taxes. It is said that the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 was intended to bar any such individual from re-entering the US, but its drafting has inhibited its enforcement.

Saverin himself has denied that he has renounced his US citizenship to avoid paying taxes. In a statement he has stressed that his decision “was based solely on my interest in working and living in Singapore. I am obligated to and will pay hundreds of millions of dollars in taxes to the US government. I have paid and will continue to pay any taxes due on everything I earned while a US citizen. It is unfortunate that my personal choice has led to a public debate, based not on the facts, but entirely on speculation and misinformation.”

He confirmed that he “will continue to invest in US businesses and start-ups, and believe and hope that those investments will create many new jobs in the US and globally”.

Nevertheless, despite the ex-PATRIOT Act being Democrat-led and fitting in with their ‘tax fairness’ election theme, and with other Republican politicians being sharply critical of its ‘class envy’ bias, Boehner felt obliged to admonish Saverin when he was asked a question on ABC television. He called Saverin’s move “absolutely outrageous” and said he would support the Schumer/Casey bill, if such legislation was found to be necessary.

A comprehensive report in our Intelligence Report series devoted to a study of the ways in which expatriate executives and employees can optimise their remuneration and taxation situations in a number of the main English-speaking countries is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report10.asp

Tags: Individuals | Expatriates | Compliance | Tax | Investment | Tax Compliance | Law | Internal Revenue Service (IRS) | Enforcement | Tax Authority | Legislation | United States | Exit Tax | Penalties | Individual Income Tax |

 





News Archive