On Hacker News, a tech entrepreneurship community that both Phil Hodgen and I frequent, there was a discussion a couple of days ago about one entry in the Q1 2012 loss-of-citizenship list which matches the name of a well-known entrepreneur. (Edit: to clarify, I’m not talking about Eduardo Saverin, the news of whose renunciation just popped up on Bloomberg; I wrote this post before that news came out. This is about another guy, follow the first link in this post if you want to know his name).
Regardless of whether or not that name is indeed him, the news sparked some interesting comments. This should serve as a reminder to us: the Isaac Brock Society is not the only collection of people out there who object to the United States’ citizenship taxation policy. There are many others, most of whom are just going about their daily lives while trying to grin and bear it, and who may never give us “extremists” more than a passing glance — but whose overall silence should not at all be taken to imply acquiescence to this unjust state of affairs, as the mainstream media do every time when they say “1,800 renunciants is such a small number compared to the six million Americans abroad”.
I’m not going to mention the name of the alleged ex-citizen here (and I’ve replaced it with “***” below) because I’m not interested in making this post into a Google Hit for it. His identity is not really the point; if he wants to confirm it publicly, he will. If you want to learn more about the entrepreneur — who of course is not necessarily the ex-citizen mentioned in the list — you can see his website: he moved to Singapore last June. (Incidentally, when he moved, I warned him about the potential tax issues of overseas entrepreneurship). If he indeed gave up citizenship, he would almost certainly be a covered expatriate.
This is the second time in a month that this topic has come up on Hacker News; there was a discussion about CNBC’s article last month, on which Phil Hodgen left a number of relevant comments, and where I also blew up at some guy who counselled a would-be renunciant to spend “$50 and 2 hours learning TurboTax” instead. I didn’t see Phil popping up on this latest thread, but there’s some good comments from other people. First, mbesto, an American living in London, wrote:
Not sure if he reason is tax related, but I will say this…I’m not starting a company abroad without renouncing my US citizenship. I’ve been living in and out of the US for the last 4 years now and the fact that we get taxed when we are outside of the country is ludicrous to say the least. Are we really that arrogant?
mahmud (a Somali by background who used to live in Virginia but then moved to Australia) also posts a series of interesting comments, starting with:
As someone who holds three nationalities, and is 2 years away from a fourth: I look forward to the day I hold none. Beligerence of the “State” knows no bounds, I hope we can free ourselves from this regressive construct and, once again, live in this world judged by our own merit and character, beholden to none …
He then counters the common Homeland myth that American citizens living abroad get “free evacuations” and that’s why it’s so great to hold on to a U.S. passport and keep paying taxes:
The U.S. embassy has evacuated my family and we’re still paying for it. It’s not free. We could have hired a private militia and escaped to safety for 5% of what we paid the state department … Somalia 1991. [two-digit]k per person. Do the math. (I need to ask the family, I remember it being more than 30k).
For those of you who are interested in this issue, Lisa also has an interesting comment about her experience as a Swedish and American dual citizen in Egypt during the evacuations in 2011, contrasting the actions of the governments of each of her passport countries. As for mahmud, he sadly concludes:
I can’t afford not to be a U.S. citizen. I’m a non-millionaire atheist black man with a Muslim name and an American accent. My kind don’t last long in the wilderness, I will be traded by intel agencies like a baseball card.
woe (a new user who joined specifically to comment on that post) left a number of comments, including:
We can only speculate about *** but generally speaking, for a US national residing overseas who will never go to the US, holding US citizenship is more trouble than it’s worth. Look at my daughter. She was born in Europe with three nationalities, including American. Say, for the sake of argument, she spends her entire life in Europe. She will nevertheless be expected to file a tax return with the IRS every year, to possibly pay US taxes, and to file an FBAR every year should she have more than US$10,000 in the bank.
At the moment the requirement to pay US taxes generally only kicks in if your income exceeds certain thresholds, but given the lack of esteem Congress has for overseas US nationals I would not be surprised if the rules governing this became more onerous … These requirements are simply unconscionable for somebody who has never received and will never receive any services from the US government. And yet they will be imposed on her, unless she takes concrete action when she turns 18 to renounce her American citizenship – because she has US nationality, whether she likes it or not, along with the insane obligations that come with it.
and:
US tax practice incents every permanent expatriate to drop their citizenship, regardless of net worth.
Every year around this time I stare at a stack of tax paperwork and contemplate the hours out of my life I’m about to lose to end up with a tax return that ends with “0” on the bottom line and I get sorely tempted. Every year I also wonder if it’s going to be the last with “0” on the bottom line. The foreign earned income exclusion this year is $95,100. My salary’s higher than that. So far I’m always managed to make up the difference on the foreign housing exclusion, but sooner or later I’m probably going to end up being expected to cut a check to Uncle Sam.
Renouncing costs $450. Once my American tax bill hits that amount, that’s probably me making an appointment at the embassy. Let’s be clear: I haven’t set foot in the United States for ten years, and I will never move back. I hold an EU passport. I receive absolutely nothing from the United States. Being forced to file intrusive, time-consuming paperwork every year is bad enough, but having to actually pay taxes would be simply unacceptable.
And finally, the top-rated comment was written by cletus, an Australian living in New York City, who writes:
I can’t think of another developed nation that is quite so overbearing when it comes to foreign income. US citizens who haven’t been in the US for 40 years and work in other countries STILL need to report their income to the IRS (as an Australian who lives and works in the US, Australia doesn’t care about my income as one example). The reporting requirements on tax residents in the US (citizens and non-citizens) is absurd. If I fail to disclose my retirement account in Australia, established well before ever working in the US, the US government can technically imprison me and charge me a penalty of 300% of the value of that retirement account (all in the name of “fighting terrorism”).
What really doesn’t sit well with me is the presumption of criminality that exists in US law (actual and enforced). The presumption of innocence seems to be some kind of anecdote in history. I know I’ll never take up US citizenship. No thanks. I’ll stick with Australia/Britain (dual citizen) thanks. In all honesty the only reason I’m even here is because I want to see it (New York in particular) before it’s gone. The US reminds me of the crumbling, dying days of the Roman Empire.
Unfortunately, a lot of ordinary Hacker News readers weren’t really interested in the story, but came in to start the same old Remocrat vs. Depublican arguments that dominate discussions of renunciation issues on every other mainstream site. There were of course the usual stereotypical Homelander comments opposed to the idea of giving up citizenship:
run4yourlives: Every country has requirements of its citizens. A lot force you to serve in the Armed Forces. The US doesn’t do that. While I agree that the US isn’t as welcoming as it once was and has always had an onerous tax code, for foreigners it is still a huge benefit to work and do business there.
achille2: My parents sacrificed an incredible deal to come to the US. For the life of me I can’t comprehend why someone would do this. Loss of citizenship is permanent. Your kids lose it as well. Why would *** would do this to his kids.
noahc: My understanding is that ~1M a year isn’t enough to justify most people loosing their US citizenship over. However, *** isn’t exactly most people. My general sense on the issue is that money, in particular taxes, is something *** worries about.
And as cletus also points out, the story was not very heavily upvoted (only 70 upvotes, against 159 comments), and appears to have been down-modded off the front page — maybe by the people who don’t like to hear any news that the U.S. isn’t the greatest country in the world, but more likely by the people who came in and saw the usual bunch of raging idiots getting into another fight about taxes in general rather than staying on the specific topic of renunciation. Regardless, anti-emigrant sentiment is especially strong in the tech sector, where U.S. venture capitalists — who have significant trouble investing in non-U.S. ventures — try to make up for their U.S.-imposed tax handicap by instead convincing every ambitious techie that Silicon Valley is the only place in the world you could possibly want to do a startup, and if you don’t move there then clearly there’s something wrong with you.
Incidentally, while looking at an earlier Federal Register list I came across a name matching that of another famous tech guy — one who is well known to have started a new venture outside of the U.S. recently after a number of years living abroad. (Edit: to be clear, again I’m not talking about Saverin). If he did not renounce but instead remains a U.S. citizen, his new venture would be a Controlled Foreign Corporation, with all the negative implications that will have for his business partners. I’m reasonably sure the renunciant listed is him and not another guy by the same name: a name matching his wife’s name is listed in the same quarter, and neither name is very common. I don’t think I’ll mention his name publicly right now; it may be better just to leave him and his kids in peace. (Maybe I’ll e-mail and ask him, though he’s famous enough that he might never see my email).
It’s too bad, because his story is another strong counterexample to the pervasive American myth that the only land of opportunity for technology entrepreneurs is the Bay Area. But I’m sure there will be other counterexamples as well in the future, from people who are more willing to go public with their stories.
The point that having a US passport in Egypt is proof that the US’s magical evacuation assistance is compensation for all the IRS / FATCA hassle is laughable. Pay any Joe Bloggs enough money and they would’ve flown a plane in and moved people out. If the price was right Richard Branson would’ve come with champagne.
While the Egyptian situation was volatile and dangerous depending where you were, it was hardly a full fledged warzone. The Rodney King riots in LA probably posed as much danger to some people. It was hardly a scene of war refugees, in torn clothes, hungry, and by virtual of the US passport was lucky enough to cross some magical border for self-preservation. Pppleeaase – In this case the US acted more like a travel agent, providing a service at a price (and pretty bloody expensive as well). That’s it. That’s all there was to it.
Most bloggers on this site I think the US passport offers very few fringe benefits abroad if any. The level of service reminds me of the embassy scene in the movie Frantic (wind ahead to 55 seconds to watch).
If I had been in Egypt I would have been much better off with my Australian passport than my American one – the Australian government also performed evacuation, but they did it for free.
Eric, tell mahmud I completely agree with him. That’s why the stateless thing doesn’t sound too bad sometimes. (but stateless only for residents that aren’t in complicated situations). That’s toooo funny about the baseball cards! 🙂
I always thought that the State Department would rescue you for a fee. This is really good to post because this is the #1 benefit that most resident US Citizens claim as a justification for NOT giving up US Citizenship.
You didn’t say a whole lot about the tech. entrepreneur. I think I saw a news article about this person the other day. Maybe so… Ex-creator of a popular online social site that is living it up in Singapore. Is it this one?
@Gabriel: Amusingly enough, the North Koreans (another country who are famous for taxing some of their overseas citizens) didn’t evacuate any of their nationals either from Libya or from Egypt. They told them to stay put.
http://www.npr.org/2011/06/15/137192600/north-korea-doesnt-evacuate-its-people-from-libya
I wonder what the Burmese and the Eritreans did (Burma still taxed overseas Burmese citizens back then. They stopped at the beginning of this year).
@geeez — “ex-creator of a popular online social site” — maybe him too, though I’m not too sure. The one listed in the Federal Register seems to have a different middle name.
http://news.ycombinator.com/item?id=3944467
The guy I’m talking about in this post (the second one, I mean) renounced a while ago. He was listed well before this quarter, but seems to have slipped by the media’s notice. Probably because there wasn’t as much attention given to renunciation back then.
@Eric – fabulous post!!
@all
The question is not whether a U.S. passport has any value. The question is whether it has value that could possibly be the worth the cost. It most certainly is not worth the cost.
Reblogged this on Renounce U.S. Citizenship – Be Free.
@all- if this is true then it makes a person wonder how U.S. citizenship taxation may in the long run actually undermine national security? If the technilogically savvy and the venture capitalists are finding U.S. citizenship to costly to retain then that will reduce the pool of capable people who are availabe to work on sensitive national security and military development issues.
And, what does someone tech savvy make of the huge information security problems that the IRS is experiencing with identity theft using the very information that taxpayers must disclose to the IRS with their returns? This is INSIDE the US. They want us outside the US to disclose all personal and non-personal bank and asset account identification numbers, balances, the institutions where the assets are held, plus all the usual: SSN, address, and other identifiers etc. So, if those INSIDE the US can’t get help with the theft of their personal identity and tax return information, why are we put even more at risk by having to disclose our account and asset information – for zero taxes owing? Those inside the US have no effective recourse, and the IRS is not responsive in helping them even when it agrees that identity theft has taken place using their return and tax ID – so what recourse would we have? Those outside the US will be putting at risk all their personal and business account information, as well as any other non-personal accounts we report (ex. through power of attorney, treasurer in volunteer positions, workplace accounts).
See:
http://www.accountingtoday.com/news/IRS-Social-Security-Tax-Fraud-Identity-Theft-62581-1.html?ET=webcpa:e2474:243968a:&st=email
……..”Under current circumstances, it is simply not possible for the IRS both to process legitimate returns rapidly and to combat identity theft effectively.”……
….”Olson said she is concerned about the IRS’s ability to develop procedures to promptly assist taxpayers who are victimized by identity theft, in part because of how the IRS has handled a related issue involving fraud by tax return preparers. “The IRS has struggled to unwind the harm done to victims—even when it had plenty of time to develop procedures,” ……..
@geeez — wow, guess I was wrong about the “ex-creator of a popular social site”. Saverin just confirmed through his spokesman that he renounced last September.
http://www.businessweek.com/news/2012-05-11/facebook-co-founder-saverin-gives-up-u-dot-s-dot-citizenship-before-ipo
That must have been one hell of a private valuation letter ruling for his 8854 🙂
That still leaves the other guy I mentioned at the end of my post (a different person than Saverin).
Zerohedge, as always, has amusing comments
http://www.zerohedge.com/news/tax-arbitrage-year-facebook-founder-renounces-us-citizenship
Could be a client of Phil’s. Phil travels to Singapore a lot although I think this guy is up in a whole different echelon than what Phil deals with.
What character is this guy in the movie. He isn’t the guy with the underage girls drinking beer at the end of movie during the police raid.
@Tim if I recall correctly, he’s the one whose girlfriend sets his scarf on fire
And the BBG article already has 62 comments:
http://www.bloomberg.com/news/2012-05-10/entrepreneurs-in-france-flee-from-hollande-s-rejection-of-wealth.htmledit: oops, wrong link, here’s the right one:
http://www.bloomberg.com/news/2012-05-11/facebook-co-founder-saverin-gives-up-u-s-citizenship-before-ipo.html
To be blunt this could be PR nightmare for ordinary US Persons abroad. The last time this many high-profile wealthy renunciants came down the pipeline (1996 with the whole Kenneth Dart Belizean consul scandal), we got HIPAA name-and-shame, and the exit tax …
Except there are too many “regular” people involved now.
What I want to know is what nationality the entrepreneur now has if he did indeed renounce? I assume that Singapore does not grant nationality after only one year residence and in the link above the entrepreneur describes himself as thoroughly American, implying to me a lack of an EU or other ancestral passport connection. Only other options then are that he is now stateless or got a Dominica or St Kitts and Nevis passport through their investment programmes.
@don pomodoro- according to the artilce he was born Brazilian.
Oh I must have missed that. In the article about moving to Singapore he said he was born in California?
@Don Pomodoro — the one born in California is the guy I was talking about in my original post (the one whose name I’m not mentioning).
The news about Saverin didn’t come out until just an hour ago, I didn’t know it when I first wrote this post. I’d seen the name in the list but I thought it was probably some other guy.
@Eric
Oh – Apologies! I completely missed that link in the comments feed. Thanks for clarifying.
Speaking of St. Kitts and Nevis, are there any less expensive passport islands? If I could get one for the price of a car, I’d do it. $250,000 is a little too much IMHO.
Dominica is supposed to cost around $70,000 I think.
@all- The U.S. needs to start thinking of itself like a retailer. Retailers know that for every customer that leaves your establishment because of poor service that that translates into the loss of an exponential number of many more potential customers. This man will spread the news of the U.S. regressive taxation policies amongst the very group of people that the U.S. will need to attract if it is to be competitive.
There is no better advertiser for your competition than a disgruntled former customer. For the U.S. to attempt to clamp down on renunciation will only make the problem worse and the need to renunciate all that more urgent.
http://www.customerservicemanager.com/dealing-with-disgruntled-customers.htm
http://www.deluxeknowledgeexchange.com/KQArticle_KQ32011_TheCustomerServicePayoff.aspx
@geeez: Dominica is the only cheaper straight cash-for-citizenship program. Costs $75k and the whole process takes about a year. All the others have got out of the market. (Tonga and Marshall Islands used to be really popular options in Hong Kong before 1997.) Straight from the government website:
http://www.dominica.gov.dm/cms/index.php?q=node/678
There are also “facilitators” who can get you naturalisation in the Dominican Republic for about $20k, The normal Dominican Republic residency requirement for naturalisation is already very short (2 years) and there was no official requirement that you actually lived there, just that you had a residency visa. So facilitators would bring you in once and put you in a hotel to get your initial residency visa, again a year later to renew it, and again a third time to apply for naturalisation (at which point they’d bribe someone to put your application at the top of the pile so it got done faster). It wasn’t blatantly illegal like selling a fake passport, but it wasn’t totally above board either. But apparently they’re clamping down on this now, because actual DR citizens got sick of shady international folks using their passports — it meant that almost every other country in the world made them get visas, even in Latin America.
http://www.tdvpassports.com/
Other than that there’s the guys like Vince Cate (an encryption expert) who seems to have straight-up bought a Mozambican passport for $5k and then went and renounced US citizenship:
http://partners.nytimes.com/library/tech/98/09/cyber/articles/06encrypt.html
HAAHAHHAHAHA the ex-facebook founder wants to invest in Brazilian companies. I think his timing is a bit off. Unless he knows how to do business here, many people are going to siphon a lot of money off him.
Brazil was only dented by the recession back in 2008, but now 4 years later, consumer demand is starting to dry up. The Government is lowering interest rates (which are sky high) to try to stimulate demand. But many people are already extended as it is. Capital outflows last week were very high. Now is not a good time… but if he wants to give it a whirl, it’s his money.