U.S. senators flame Facebook's Saverin on taxes

Reuters News
Posted: May 18, 2012 5:08 PM
U.S. senators flame Facebook's Saverin on taxes

By Kevin Drawbaugh

(Reuters) - Facebook co-founder Eduardo Saverin, who has renounced his U.S. citizenship, was accused on Thursday by two U.S. senators of dodging taxes on Facebook stock-market profits.

When the company goes public on Friday, Saverin will make a fortune. Bloomberg first reported last week he had renounced his citizenship and, in so doing, may avoid U.S. taxes on the initial public offering.

"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," said Senator Charles Schumer at a news briefing. "We plan to put a stop to this tax avoidance scheme."

Facebook plans to raise billions of dollars in an initial public offering that could leave Saverin, still a part-owner of the social networking company, with a big capital gains tax bill, estimated to be $67 million.

Brazilian-born Saverin was educated in the United States and became an American citizen. In college, he co-founded Facebook with Mark Zuckerberg and others.

Saverin now lives in Singapore, which has no capital gains tax. The long-term U.S. capital gains tax for high-income Americans is a minimum of 15 percent.

A Saverin spokesman said in an email that he would try to provide comment on Saverin's behalf later on Thursday.

Saverin has said that his relocation to Singapore was for business investment reasons, not to avoid taxes.

Schumer and Senator Bob Casey, both Democrats, said at the briefing that they were proposing legislation to crack down on what they see as expatriate tax avoidance.

Under the bill, expatriates worth $2 million or more, or with average income tax liability exceeding $148,000 over the past five years, would be presumed to have renounced their citizenship for tax avoidance purposes.

These high-income expatriates would get a chance to prove otherwise to the Internal Revenue Service, but if they could not do so, then they would face a 30-percent tax on future investment gains, no matter where they were residing.

So long as the taxpayers failed to pay these taxes, they would not be allowed to re-enter the United States.

"We simply cannot allow the ultra-wealthy to write their own rules," Casey 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. Renouncing citizenship to simply avoid paying your fair share is an insult to middle class Americans and we will not accept it," he said.

In a related matter, Democratic Senator Carl Levin criticized in a written statement what he said would be a $16 billion tax deduction going to Facebook via its IPO. That would result, he said, from a loophole that lets corporations claim a stock option tax deduction greater than the expense shown on their books. Levin has filed legislation to close this loophole, but it has made little headway in the Senate.

Broader proposals to reform the complex U.S. tax code for the first time since 1986 also have not advanced in Congress, with lawmakers at a stalemate on a range of issues because of stubborn partisan divisions on tax and spending policy.

(Reporting By Kevin Drawbaugh in Washington; Editing by Tim Dobbyn)