I’ve been in contact with a columnist who asked me what I thought about Eduardo Saverin’s expatriation. I respond as follows:
Eduardo Saverin has exercised his unalienable right to renounce his US citizenship. This right is enshrined in the Declaration of Independence of the United States, the Ninth Amendment of the United States Constitution, the Expatriation Act of 1868, the Freedom of Emigration in East-West Trade, and the Universal Declaration of Human Rights, which for its part declares (Article 15, 2):
No one shall be arbitrarily deprived of his nationality nor denied the right to change his nationality.
Yet for exercising a fundamental right, some in the media have vilified Eduardo Saverin. I suppose because he is rich, and the rich today, because of class warfare, are open targets of abuse and defamation. But I understand why Saverin expatriated. I am not rich, but I sympathize, nay I identify with his desire to shed US citizenship. I have done it too.
Saverin remains a citizen of his native Brazil. Brazil doesn’t tax Saverin’s world-wide income; yet the United States was doing that, even though he now lives in Singapore. Did you notice whether he also renounced his Brazilian citizenship? Not a chance. But with US citizenship comes (1) onerous tax filing requirements; (2) invasive bank account reports; (3) the possibility of being locked out of business deals because foreigners don’t want to be partners with an American on account of invasive filing requirements; (4) inheritance tax claims by the IRS when you die and a foreign spouse may have to deal with this unjustly (I think of my own wife). The only benefit of citizenship to an expat is the right to move back to the United States whenever you want. But if you omit doing your filings, then you feel like a fugitive anyway. I will worry about this until the IRS finally decides that my filings are adequate. It is a chilling feeling that a tax bureaucracy has the final say on whether I am welcome or not in the United States. A guy like Saverin can afford the tax professionals–most of us can’t–for an increasingly complicated and oppressive set of rules for those who live outside the borders of the United States. But why bother to continue doing these filings if you don’t really plan to live in the United States again?
Another question we should ask is, “Why did Saverin move to Singapore?” Perhaps it is because the United States expects the rich to pay all the taxes. According to a 2010 chart, the top 1% of taxpayers in the United States paid 40.4% of all income taxes. I wrote about this, comparing it to the tax burden in Canada. The problem is that the 1% pay a disproportionate amount of the taxes while the top 50% of wage earners pay only 3% of the taxes. Most Americans pay no federal taxes at all. Jim Rogers also lives in Singapore and speaks frequently to the US media with his Southern US accent. Why do billionaires live in Singapore? Perhaps it’s because billionaires are welcome in Singapore. They sure are welcome in the United States too, provided they pay 40% of the total tax burden.
So Saverin moved to Singapore and the United States pursues him there too. He’s got to be thinking that his country of birth, Brazil, didn’t do this to him, why should an adopted country place such burdens on him? And for what? The right to move back to the US? That’s a lot to pay when the United States is just one country and not even the best if you are an investor or entrepreneur.
America didn’t make this man rich. He came from a wealthy Brazilian family. He didn’t need the United States. The United States needed him. He was the one who made Mark Zuckerberg rich with his investment to set up the original servers for Facebook. Americans like foreign capital. That’s why there is zero capital gains on foreign investment in the United States. The tax code is set up such that foreign investors will invest, make their money, and pay no capital gains. Increase the capital gains on foreign investors, get less of their investment. See the conundrum?
The question of why Saverin renounced his US citizenship is easy to answer. The response of his spokesman, Tom Goodman, should be accepted as the truth. I certainly do:
“Eduardo recently found it more practical to become a resident of Singapore since he plans to live there for an indefinite period of time,” Goodman said. Saverin still does hold Brazilian citizenship, Goodman said.
This is also the reason that I relinquished my citizenship: it is more practical to be resident of Canada without US citizenship. I plan to live here for an indefinite period of time.
I became a US citizen at birth. I had no choice in the matter. My question is why Saverin became a US citizen in the first place. Many wealthy investors are asking now whether they should become a citizen or Green Card holder and are responding, “No thank-you.” The tax consequences of such an act has now made becoming an American citizen unattractive. And the media rhetoric doesn’t help either. Now that the press has decided to excoriate Saverin with the 1% rhetoric, the US can start kissing foreign investors good-bye forever. An example the media’s response is the LA times piece by Yale law professor Bruce Ackermann. Ackermann wants to turn the United States into the worst place in the world to be an ex-citizen–placing a permanent ban on those who relinquish their citizenship; it is a vindictive, populous article, that doesn’t even take into consideration the ramifications of what it says. It is the same sort of attitude that caused Britain to fight against the colonists who declared their independence–i.e., such measures would be tyrannical, and it is chilling that a law professor, who is supposed to be a smart guy, would write such a piece of demagoguery, and thus wish to curtail the right to expatriate.
Ackermann’s proposal is a direct contradiction of the Expatriation Act of 1868 which recognizes the right of expatriation as a fundamental principle of the United States government, insisting that naturalized citizens be treated as native-born citizens. To be sure, this is a rebuke of nations that mistreated naturalized Americans, but now Ackermann wants to abuse those who become naturalized citizens of other countries. Thus, according to US law and international law, the United States must be consistent towards Saverin and all other emigrants, treating them as all other native-born citizens of their respective countries. To do otherwise is to abridge “a natural and inherent right of all people, indispensable to the enjoyment of the rights of life, liberty, and the pursuit of happiness.”
I saw a reader comment accusing Saverin of being like the rats leaving a ship. The analogy is perfectly suited to explain the corrupt, fiscally unsound ship of the American economy which is sinking into a deep abyss. But it is unjust towards Saverin. He is no rat. He has exercised a fundamental right. He is a citizen of Brazil. And he is now what Obama once claimed to be, a citizen of the world. He has only shed his citizenship of the United States because it is an excessive and unreasonable burden upon his freedom as a citizen of the world.
I believe that the American media would do well to take the high road, and instead of rebuking Saverin, they should wish him well and explain to him that if he ever wants to come back again and create another multi-billion dollar company, that he would be more than welcome to do so. Important investors around the world are watching to see how Americans react. Don’t screw it up.
This is a cross post from the Righteous Investor.
Great post Petros! If your columnist publishes a column on this, please give us the link so that we can add additional feedback.
Saverin has certainly not renounced his Brazilian citizenship. Why would he want to do that? Brazil, unlike the United States, does not subject the foreign income of its non-resident citizens to its income tax.
I preseume there may have been others, but the one and only case I am familiar with of a Brazilian renoucing his citizenship, was when President Reagan appointed an American from Alaska by the name of Motley as US Ambassador to Brazil. Motley had been born in Rio de Janeiro to a US father who was an executive with the Brazilian subsidiary of a US company. He was raised there and attended the same Escola Americana – American School our 4 children attended during our 7 years of residence in Brazil. He moved to the US for his University education and stayed in the US afterwards.
Motley, having been born in Brazil to a US father posessed dual US-Brazilian citizenship. Brazil refused to accept him as the US Ambassador unless and until he renounced his Brazilian ciizenship since, as a matter of policy, a Brazilian citizen could not be recognized as the official head of a foreign diplomatic representation in that country. Brazil recognizes the diplomatic status of foreign consuls who may hold dual Brazilian citizenship, but not ambassadors.
So Motley renounced his Brazilian citizenship in order to qualify for acceptance by the Brazilian Government as the official representative of the Government of the United States in Brazil.Being a native speaker of Portuguese all indications are that he was an exceptionally good US Ambassador to Brazil.
Why did Severin become a US citizen? I can only guess, but I suspect that at the time he did so he expected to spend the rest of his life in the US. Little did he realize at that time that he might relocate to a different country where his US citizenship would be a handicap to him. Living in Singapore, as a result of FATCA, he might even have had difficuly as a US citizen maintaining a bank account there. Quite obviously the US Exit Tax on persons with assets worth $2 million or more meant he had to pay through the nose to renounce his US citizenship, but comparing that one-time cost to what it would have cost him in additional taxes and all of the multituude of FBAR forms and FATCA forms he would have to submit to the IRS and the US Treasury for the rest of his mortal life, he probably just chose to cut his losses pay the exit tax, renounce and end this lecherous tax relationship with the US. Also, as a person with US citizenship resident abroad his estate at his demise would be subject to the US estate tax as well as the estate taxes of his country of residence.
He probably just did not realize the Tax Trap he fell into when he became a naturalized US citizen. There is a tremendous lesson in his renunciation for persons of all nationalities who are astitute businessmen in immigrating to the US, and for foreign students who have come from abroad to study at American colleges and Universities. They are just now becoming aware of what US citizenship-based taxation can do to destroy them financially if they later decide to return to their native countries, accept a job in or relocate later to a different country. US citizenship-based taxation is “forever,” no matter where you later decide to live.
So the lesson in this is that if you are a US citizen and decide, for any reason, to accept a job or marry a foreign spouse and move to a different country to live and work, you will likely have to renounce your US citizenship in order to live a normal life and to free your children born abroad from this onerous burden of double taxation they automatically acquire the moment of their birth.
Bom dia, USA! Saverin will probably invest a good part of his billions into the zooming Brazilian economy rather than the US. Probably a good example about how FATCA, FBAR, and double taxation probably cause more capital to flee the US than they will succeed in gleaning.
Let’s not forget – the US is simply acting as the conduit for Facebook. Facebook’s revenue isn’t solely 100% American. Foreigners have helped to prop up its stock price by virtue of the other 5 billion “world citizens” deciding to join Facebook’s party.
In other words, Facebook would be nothing if it was an American-only social networking site with American-only members. Boy wouldn’t that be exciting only to have Carl Levin to friend and other homelanders….pppleeaase.
Wow, super response!
Somebody put this on our twitter widget http://networkedblogs.com/xHdE4 NYT Room for Debate on “Citizenship as It Should Be”. I can’t seem to post even though I am already registered with NYT, I login but nothing happens. As an aside, I just found this debate on RT from some time ago that covers “American Exceptionalism”. http://www.youtube.com/watch?v=h4TuuDk2PNU
Americans are just pissy because Saverin left the “US Party”. “Even Mark Cuban spoke out against it…”
I really think that this is one area where Americans are perhaps envious; they envision some life on the beach sipping margeritas, and they really have no clue. Ignorance.
I’ll bet that Saverin chose Singapore not just due to taxes, SP is a technology hub nowadays. He is after all, involved in technology. Just like the comment I made yesterday “Many places that were worse than the US 30-40 years ago, are now better.” Singapore has to be one of them. Wikipedia has some links about how the country there had some real problems a long time ago. Instead of digging the hole even deeper, as in the US’s case, they chose to make things better.
@Geeez,
That’s why I recommend the media to take the high road on this one. To do otherwise makes Americans look petty and vindictive. I know that they actually are petty and vindictive, but the problem that they now face is also looking like they are petty and vindictive.
It was otherwise after World War II; the United States began its post World War II hegemony through magnanimity by paying for the reconstruction of the countries and economies of its enemies, Japan and Germany, such that the world came to love America. Now, the United States is beginning to appear petty and vindictive. Too bad for them.
@Jefferson D. Tomas Yes, the NYT’s custom-rolled commenting software is not very good. (Just like large other parts of their web infrastructure). It eats comments all the time. If you press the “post” button but then your internet connection or their server has problems, it doesn’t tell you anything is wrong, it just keeps spinning, and you can’t even press the button again to try to repost it. I only noticed it because I do lots of web development so I have a piece of software called “Firebug” installed (which I can turn on to try to debug/monitor issues like this).
America had no choice but to implement the Marshall Plan. The alternative would have been to opress Germany as was done following the Armistice at the end of WWI, which only created economic conditions and a weak democracy in Germany allowing Hitler and his thugs to take control. Today, it is the entente between France and Germany that holds Europe together and prevents a future such conflict. Hollande went immediately to Germany a few days ago. Merkel shook his hand (she used to kiss Sarkozy in the French way) and appeared to speak to him without a translator. This is what is important: being on speaking terms with your old rivals (everybody learned how bad two major wars were) and not trying to dominate others as the US is doing. If we lose the memory of what hapenned in the 20th century, we will go back to the dark ages.
@Eric I managed to post via Firefox, but my comment has disappeared. Before being able to submit the post I had to remove some links and at one time it said that my message was spam, but then I modified the message a little and it went through (but was only displayed for a short time). I wonder if Jeff is becoming so unpopular with the powers that be that they try to silence him? Why don’t they silence the mope that constantly posted the same one liner of insults devoid of any debate on the McClatchy site?
@Jefferson D. Thomas, can you imagine a US president speaking to a foreign head of state in any language other than Engilsh? To most Americans, unfortunately that would be an unacceptable indignity.
As they used to say a person who speaks 3 languages is trilingual, a person who speaks two is bilingual; but a person who speaks only one language is American.
I wasn’t there but I can imagine that the only language heard at yesterday’s IRS hearing on FATCA was English. Does anybody have any news on that hearing? Persons with US citizenship living abroad had better know English in order to deal with the IRS, read its thousands of pages of instrucitons and correctly fill in all the forms. A few have been translated into other languages, but not very many,
Well, I can read European and Swiss law, and that means I understand the contraditions of IRS policy against them. I bet there is hardly anybody in IRS or Treasury or Congress who has researched this angle, although there are often English translations available, due to the European Commission’s use of English as an official language. I believe that there was once a State Department policy that said the US would accept documents written in French. Maybe if I got somebody to stick a rider written in French into a House or Senate bill then it would get passed because nobody would bother to read it.
“Americans can always be counted on to do the right thing…after they have exhausted all other possibilities.” – W. Churchill
Haha, too funny Roger. Very true. But to be 100% fair, most Brazilians don’t speak English, but some do. That “some” I suspect is higher than the number of average non-foreign-parent Americans that speak another language fluently.
Americans just can’t understand it. I even try to show my parents some easy stuff, since they have a Brazilian grandchild, but they just don’t care.
I remember as a kid throwing the football around with my Dad. He was in the Navy during Vietnam, but his ships always went to Europe. He told me stories about how a couple of guys that spoke French and German would serve as the translators at State Dinners with the Carrier captains and foreign government officials. Since that point in my life, I wanted to speak other languages and live abroad.
Living abroad, speaking a foreign language day-in-day-out is such a joy for me. There are many people I know here that had never met a foreigner in their entire lives before meeting me. I like being here. It’s a shame that something that brings me so much joy is “alien” to, and persecuted by the people where I came from.
@Roger – basically the news in the press indicates the US is going to do this regardless what the world thinks.
In my opinion he firebreak is going to be foreign governments enforcing a sort of resident-based data system upon the US. In other words if you’re a dual national, perhaps your home country will not pass on your details leaving sole American passport holders bearing the brunt.
Of course this is just conjecture, but it goes back to equality of law. How could for example a Brazilian US dual passport holder living in Brazil be treated differently from another Brazilian citizen, this will be a matter for the courts.
It won’t shut off the IRS, but it will at least shut off their data more or less putting the situation back to pre-FATCA until someone makes up their mind whether to renounce or not.
This would work for duals who never go to the US, and as for IRS collection at least the potential victims would have the oppourtunity to argue constitutionality in their local courts abroad.
@geeez, I remember 22 years ago my wife and I traveled to Portugal, rented a car and just drove around the back country near the Spanish-Porguese border. We stayed in small inns, etc. in places where foreign tourists just never went. We saw just one English tourist couple during the week we were there.
I walked into a small shop to buy a few postcards. The girl behind the counter – barely in her teens, listened to my Portuguese, spoken with a Brazilian accent, and immedialy assumed I must be Brazilian. Everyone in Portugal watches the TV Novelas from Brazil, so even though in Brazil people often recognized I was a foreigner, to this little girl I was “Braziian.” She shouted to her mother in the back room “Brasileiro! Brasileiro!” and she came runing expeciting to see a real live Brazilian. Neither had never seen one before.
How You Help Make Faceook Millions
http://edition.cnn.com/2012/05/16/tech/social-media/facebook-users-ads/index.html?hpt=hp_bn9
With regards to the LA Times “Payback” article, I sincerely believe that the US will start to actually ban former citizens from entering the US for any reason. The law for doing this, the Reed Amendment, is already on the books and would merely need to begin to be enforced, much like the FBARs beforehand. The law itself specifies blocking those who renounced for “tax reasons”, but seeing as the FBAR was originally intended to go after drug dealers and money launderers, I don’t see it as being too unrealistic to see its application being expanded to everyone.
Personally, I will still be renouncing even though I realise and suspect that, in the future, I may very well never be allowed back in the US. I find that petty and silly (just treat me like a normal ESTA passport holder already!), but I have never seen anything that seems to touch a deeper nerve with most Americans than the idea of somebody renouncing their citizenship. It seems to be equivalent to somebody renouncing their religion in a very traditional family, if not worse. I believe that things will get much, much worse for all expats before they get any better at all.
@Don Personally, I would be more worried about getting stuck in the US. Passport confiscated, foreign passport not valid for leaving, etc. The US doesn’t want to leave us alone, so I won’t contribute to the US economy anymore.
@Jefferson D. Tomas. I used to have a recurring nightmare that I was somehow stuck in the US and couldn’t get back to my family in the UK!
It wouldn’t surprise me in the slightest if we get banned from visiting in the future. They certainly seem to be hellbent on punishing us for something- lack of appreciation!?!?
I have the same recurring nightmare, and also (daymare?). I am frightened by what the US government might try to do to me if they could get their insular hands upon me. They don’t realize what we could contribute. They just see us as traitors. I get constant positive comments overseas because I am not a mere monolingual and very perceptive about things going on throught the world. Rare for an American, many say.
@all, there is a bill in Congress that would provide for the revocation of US passports issued to persons who allegedly own $50,000 or more to the IRS. Should this invalidation occur while the passport holder was traveling outside of the US, a US Embassay abroad could issue a temporary passport valid for return travel to the US only.
It was attached to the Transportation Bill, which did not pass, but I understand that this revocation provision is still very much alive.
I thought it (transportation bill) was about to pass in one chamber and was going to the other? Do you have a recent news article on this? When you say that the Transportation Bill did not pass, and that the “rrevocation provision is still very much alive” do you mean that somebody wants to propose it seperately as a new bill or a rider to yet another?
@jefferson,I am writing from memory, but as I recall some short-term transportation bills were passed in both houses, to cover the transportation funding on a short-term basis, but that a final solution has yet to be worked out and enacted. Apparently the passport issue was pushed aside temporarily but there will still be an effort to tack it on to the long-term bill that still needs to be enacted to keep things going beyond the short term interim measure.