Business Insider says Eduardo Saverin could be banned from the United States

BANNED FROM THE USA: Billionaire Facebook Cofounder Could Be Barred From America After Renouncing Citizenship

If the United States were to apply the Reed Amendment against Saverin, it could lead to a constitutional challenge someone who has the pocket change to pay to for one.  This could also result in a challenge of the constitutionality of the HEART Act provisions, i.e., the current exit tax.

The other problem with banning Saverin for life is this:  He’s a billionaire and the world is a big place.  How is this going to hurt Saverin?  But it will be a big message to the world that the United States is not the place you want to go if you want to do a business start up.  The United States will only hurt itself if it decides to be vindictive towards Saverin.

Renunciation Guide has a good primer on the subject of the Reed Amendment (here and here).  There are serious issues of fairness and constitutionality.  Above all, the Expatriation Act of 1868 makes it clear that the United States officials must recognize Eduardo Saverin’s right to expatriation as a fundamental principle of the government (based on the language of the Declaration of the Independence).  To punish Saverin with a ban from entering the country would thus violate Saverin’s right to expatriate.

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45 thoughts on “Business Insider says Eduardo Saverin could be banned from the United States

  1. Saverin definitely has thousands of times more resources than Petros, Jeff, or probably most of the others here at IBS. He could have dealt with the tax issues had he chosen to stay. If he gets barred, he has the money to fight that, and probably wouldn’t be barred if he continues to invest in the US. I would like to see what sort of documentation the lawyers are putting together to substantiate the claim that the renunciation was not tax-motivated.

    I don’t want to create a separate thread for this, but I found the following video very funny in the ridiculous sort of way: http://www.reuters.com/video/2012/04/03/mustached-americans-march-on-washington?videoId=232826364 A bunch of homelanders are asking for facial hair grooming cost deductions. This seems so trivial compared to the issues that we face with FATCA, FBAR and Double Taxation. I suspect that the march portrayed on the film was a sort of practical joke or half-serious. But what I find ridiculous is that a bunch of homelanders are worried about the price of a pair scissors or a razor or wax, shampoo, whatever, and they probably ignore the discrimination that occurs against us US Persons abroad.

    Maybe we could get a group of people to march in Washington on our behalf, since it would be very costly for all of us to get together and some of us might be worried about the IRS trying to get the haebeus grabbus on them for refusing to file taxes to the US when already compliant abroad.

  2. They are under the assumption that Eduardo may actually want to go back there. The world is a big place; the US isn’t the only country in the world. Maybe he just got sick and tired of the Patriot Act and so many loss of freedoms.

  3. And here it is … the US is acting like the evil ex-wife who just can’t let go. They should have a warning when you become an American citizen that if you should happen to make alot of money they will trap you inside the country for the rest of your life.

    I’m sure Eduardo saved alot on taxes when he moved from Brazil to the US. Brazil didn’t try to hold onto him the way the US is doing.

    Senators to Unveil the ‘Ex-Patriot Act’ to Respond to Facebook’s Saverin’s Tax ‘Scheme’

    At a news conference this morning, Sens. Schumer and Bob Casey, D-Pa., will unveil the “Ex-PATRIOT” – “Expatriation Prevention by Abolishing Tax-Related Incentives for Offshore Tenancy” – Act to respond directly to Saverin’s move, which they dub a “scheme” that would “help him duck up to $67 million in taxes.”

  4. No OMG. I haven’t seen any mention of him in the local papers, and no one is saying anything. My wife said “Yeah, I heard about a Brazilian there… lucky guy.” So there you have it, the US way of seeing things and the Brazilian way.

    Personally, I’ll go back to the US after the Patriot Act is repealed. It’s not really the Act itself that that find revolting; it is the underlying thinking, paranoia, fear.. etc..

    Seriously, a challenge for everyone: tell me something that is really “special” in the US that you can’t find anywhere else?

  5. Honestly, it’s like McCarthyism round 2. Sometimes I think the US NEEDS a group to demonise and right now it’s the expats. How dare we move overseas and how dare some of us give up our citizenship, no matter what the reason! Traitors!

  6. Can you imagine any other country trying to trap it’s citizens inside without the media being in an uproar about it?

    This is a shameful period in the history of the United States.

  7. I think Eduardo should spend some of the millions he’s going to save by suing the US government. Most of what they’re doing to expatriates should be unconstitutional. We know the US government is immoral because almost no other government on earth would even think of doing stuff like this.

  8. @omg

    Why would he want to go back? That’s part of the point of renouncing.

    Here is an excerpt describing this absolutely moronic idea:

    “At a news conference this morning, Sens. Schumer and Bob Casey, D-Pa., will unveil the “Ex-PATRIOT” – “Expatriation Prevention by Abolishing Tax-Related Incentives for Offshore Tenancy” – Act to respond directly to Saverin’s move, which they dub a “scheme” that would “help him duck up to $67 million in taxes.”

    The senators will call Saverin’s move an “outrage” and will outline their plan to re-impose taxes on expatriates like Saverin even after they flee the United States and take up residence in a foreign country. Their proposal would also impose a mandatory 30 percent tax on the capital gains of anybody who renounces their U.S. citizenship.”

    Question for you Senator Homelander:

    How do you intend to collect this?

  9. @all- “a 30% capital gains tax on anyone who renounces their citizenship”. So much for the narrowing of the category of not being a covered expatriat.
    In the future you will have to expariate yourself before you begin to embark on making any asset improvements in your life, however modest they may be.

  10. I hope more of the 1% expatriate because then the heat will really get turned on the Democrats. If all of the 1% expatriated, the taxes of every other American would have to go up 66% to make up the loss.

    Considering the US government can’t even pay their bills with the 1% still there, they’re going to have Armegeddon on their hands if they don’t stop being so unfriendly to the rich.

    I’d hate to see what the unemployment rate will be if all the rich folks leave.

  11. @ Renounce, Yesterday another Brocker took me to dinner–on of the few perks of blogging. Afterwards we mused about whether a new administration would signal an improvement. But it seems to me that even if we have a new president, things are going to get progressively worse, until, our little society will be here at ground zero of a growing protest movement. This is likely to be ten to twenty year trend before it is over, and the result really could be about 6 million renunciations–some people who are still in the US but decide to go back to their home countries, and many like us living abroad already.

    I don’t think that the US is going to take my advice and to take the high road. They are taking the lowest road possible. I am beginning to think that being an American is a mental disease.

  12. @Petros, the tide will turn. When their pain becomes unbearable they’ll see the error of their ways.

    I’m hoping that a Republican administration will swiftly move to a territorial tax system for corporations and reform the tax code for individuals too. If they don’t the expatriation numbers for the rich have to keep going up because they can’t afford to pay taxes in two countries … once in the country where they actually own businesses and then again in the United States.

  13. @geeez: “Seriously, a challenge for everyone: tell me something that is really “special” in the US that you can’t find anywhere else?”
    My family.

  14. Because of technology many business models have died.

    If you think of US citizenship based taxation as a business model you have to conclude that it too is on the verge of extinction. It’s time for the US to reinvent itself or die.

    I have an Internet company that sells all over the world. I’m amazed at the progress so many countries have made.

    I remember a time when you couldn’t make a phone call to India (where I’m originally from) without having to scream into the phone. Now I have customers in India who place orders online with credit cards. The orders ship to them from Canada and the US and arrive within a week.

    Half the products I sell are American made and half are made in China.

    My American customers are hurting the most right now and I don’t know how people in the US are surviving.

    I’m thankful that I live in Canada and our house has appreciated in value since we purchased it in 2009 and that my husband has a well paying job.

    The current US administration is flailing. They have absolutely no idea how to help the American people. Talking trash about the rich is something any fool can do.

  15. @ ladyhawk Great point. So this is the challenge to get all the families of the people affected by this nonsense involved. But the family in America is disintegrated and non-cohesive. My sisters think that I’ve gone off the deep end. But if they are unwilling to fight the abuse then they will have to come and visit me. At least my lawyer sister said that they would come to visit me in Canada for that reason.

  16. Also, the Reed Amendment applies to those who renounce their citizenship and not to those who “relinquish”. That’s an important reason that everyone should try to relinquish if possible.

  17. @foxyladyhawk- so the U.S. is building its own version of North/South Korea and East/West Germany but using taxation to make the wall. Expats will be forever separated from the mainlander families?
    What shameless extortion.

  18. If the US switches to territorial taxation, the anti-American act of renouncing US citizenship would cease to be a trend. No one on either side of the the story would be having rejection issues. We will go back to being ignored by the US. It will be as it should be.

  19. From the Ex-PATRIOT Act article above:

    “The senators will call Saverin’s move an “outrage” and will outline their plan to re-impose taxes on expatriates like Saverin even after they flee the United States and take up residence in a foreign country. Their proposal would also impose a mandatory 30 percent tax on the capital gains of anybody who renounces their U.S. citizenship.”

    What does this mean? Can we never be free from these parasites? Is this implying that if you renounce citizenship now even with under the 2 million in assets that you will end up paying capital gains taxes anyway? And what is this about “re-imposing taxes on expatriates”? Does that mean that renouncing citizenship doesn’t do anything and that there would be no way to get out of the US net? I am very alarmed at what is going on.

  20. @Don: this is seriously abusive and outrageous. The US tax code is not meant to be used to punish people you don’t like. This nearly happened after the crash when the CEOs of all the big banks got huge bonuses. Chris Dodd wanted to create new tax legislation to take it all back, and he was furious about it. I don’t care how mad you get, the power to legislate is not the power to punish. Throw these thugs out, they scare the cr@p out of me.

  21. Published a new blog post about the “Ex-Patriot Act”. This seems like the new devil to follow.

  22. Hodgen’s page for Sen. Chuck Schumer’s 30% capital gains tax proposal for Ex-Patriate http://hodgen.com/more-self-inflicted-damage-from-the-senate/

    http://abcnews.go.com/blogs/politics/2012/05/senators-to-unveil-the-ex-patriot-act-to-respond-to-facebooks-saverins-tax-scheme/

    What does this 30% capital gains tax entail? When would it be collected? When an asset acquired before renunciation is sold later on? How is this different from the covered expatriate status that already exists? Is Schumer’s proposal actually going to add something or just make existing regulations even more complex.

  23. @Don Now we have a whole zoo or alphabet soup: FATCA FBAR DATCA CUT Double Taxation, Ex-Patriot what next? When will foreign governments finally tell the US to shut up? They are acting like idiots. No other civilized country behaves this way.

  24. @All

    I am literally panicking at the moment after learning about all of this. Its just like the day that I found out about FATCA two years ago all over again. I just hope that, since I have nothing in assets (just current accounts at the bank), that they leave me alone when I renounce and that there is some sort of clause to determine who this applies to and to whom it does not. This is absolutely outrageous though for anybody who has built up any assets outside of the US and is not rich, since I imagine that they will just start to apply it to everyone. I am amazed at how vile the US country has become in such a short amount of time.

  25. Nestmann writes:

    These facts haven’t stopped U.S. consular officials from occasionally denying visa applications from former U.S. citizens, apparently using the Reed amendment as legal authority for doing so. In another case, U.S. customs officials used the Reed amendment as justification to deny a former U.S. citizen permission to board a U.S.-borne jet. Fortunately, the situation was quickly resolved in favor of the former U.S. citizen seeking to re-enter the United States.

    The officials apparently made no effort to determine if the targeted individuals had renounced—or merely relinquished—their U.S. citizenship. In addition, the State Department lumps any U.S. citizen who expatriates into a single category, which it calls “renunciants.”

    These facts make the distinction I’ve made between renunciation and relinquishment largely irrelevant. As the procedure for renunciation is simpler, and removes any question of intent, I no longer see any reason to avoid this option. In the unlikely event you’re denied permission to reenter the United States due to the Reed amendment, it won’t matter if you relinquished or renounced.

    Nestmann’s only distinction regards those who have applied for visa. No challenge has apprently been made against such a ban. For those who become citizens of Canada or other countries that require no visa to enter the United States, this particular failure to make a distinction between relinquishing and renouncing is moot. This is not a lawful or systematic application of the Reed Amendment, but a whimsical decision of a tyranical bureaucrat who’s decided what is and isn’t law. It cannot stand up in court in my view. If Congress wanted to ban those who relinquish, they would have written “relinquish” not “renounce”.

    Nestmann is also wrong. When I relinquished I did not pay the $450 renunciation fee. Clearly the State Department does distinguish between the two acts. So this is the way it works: Renouncing is only one way to relinquish US citizenship. It carries more stigma than relinquishing by becoming a citizen of another country, taking a government job in a foreign country, joining a foreign military, or taking a high level position in a foreign government. But it is less stigmatic than committing an act of treason or taking up arms against the United States.

  26. @badger, thanks for the link, Jim Rogers is a voice in the wilderness. Maybe someone should send a link to congress, because apparently they don’t know about the exit tax.

  27. I’d like to point out, that instead of the focus only on Saverin, the media – and the authors of the ‘Ex-patriot Act’ ignore the role that – wait for it! – the tax haven state of DELAWARE is playing in the story “On Tuesday, Business Insider published an account describing how Zuckerberg ousted Saverin from the company. According to the report, Zuckerberg cut Saverin out by incorporating a new company in Delaware…” from: ‘Facebook co-founder Saverin targeted by U.S. senators for tax ‘avoidance scheme’’ By Hayley Tsukayama, Thursday, May 17, 9:53 AM at http://www.washingtonpost.com/business/technology/facebook-co-founder-saverin-under-fire-for-renouncing-us-citizenship/2012/05/17/gIQAPFCyVU_story.html

    Why Delaware? see:
    http://www.corpco.com/why-delaware/
    or,
    https://www.usa-corporate.com/why-incorporate-in-delaware/
    “Tax Savings from using a Delaware corporation or Delaware LLC
    No state income tax for Delaware corporations that operate out of state
    No business license required for Delaware corporations not operating in Delaware
    No inheritance tax on stock held by non-residents of Delaware
    No state sales tax on intangible personal property
    Shares of stock owned by non-resident aliens are not subject to Delaware tax”

    and see;
    http://www.metrocorpcounsel.com/articles/18801/delaware-place-incorporation-and-dispute-resolution
    “Editor: What are the key considerations for international corporations that wish to incorporate their U.S. operations? Are they tending to select Delaware and why?”

    “Steele: If they have a specific U.S. purpose in mind such as a U.S. acquisition, the surviving corporation is more likely than not to be in Delaware for the very same reasons that domestic businesses would incorporate in Delaware. Many international corporations are concerned that incorporation of their U.S. operations would subject them to the federal tax climate and federal regulatory maze that prevails in the United States.”

    So; if the lowly ordinary individual born, or living permanently abroad, or an expatriate despairs of the “federal tax climate and federal regulatory maze that prevails in the United States” as cited above, that is not apparently a legitimate reason to complain. But, if you are a domestic US business, or international corporation operating INSIDE the US, it is officially encouraged that you incorporate in Delaware (or other competing state like Nevada) in order to minimize, or avoid state and federal taxes. And that apparently is legitimate.

    From: http://www.delawarefirst.org/25075-measuring-impact-carney-jobs-act ……..”Geisenberger said, “Every state can write its own tax laws and some states have changed their tax laws. For those states that sit back and say Delaware is taking income from them, my reaction is, ‘change your tax laws.’”…..”Indeed, many companies still think Delaware when they’re thinking of incorporating. The most anticipated IPO of the century, Facebook, will create yet another publicly traded company with its corporate headquarters in Delaware. The social networking giant “has been incorporated in Delaware since 2004,” Geisenberger said proudly.”

    But if an ordinary ‘accidental’ US citizen despairs of the lifelong cost of specialized US tax and bank reporting assistance – in order to report on already reported and taxed assets produced in the non-US country where they live; and in spite of zero or minimal US tax owed – but subjected annually by the US to jeopardy through layer upon layer of potential draconian penalties in multiples of 10,000. – even for inadvertent errors, through incomprehensible reporting requirements – well, that is something that the US seeks to outlaw.

  28. Jim Rogers said:

    When you give up your American citizenship, it’s not fair as far as i’m concerned, but the rules are that you have to pay everything, you have to pay taxes on everything you own and then you can leave. I mean no other country in the world does that, we’ve got our own Berlin Wall, it’s very expensive to leave, to give up your citizenship. Iran, North Korea and Cuba, and some countries it’s impossible, very expensive to give up your citizenship.

    Read more: http://www.businessinsider.com/jim-rogers-eduardo-saverin-renounces-us-citizenship-2012-5#ixzz1v98mSTaZ

    Peter Dunn expatriated because of the New Berlin Wall:
    http://righteousinvestor.com/2010/02/25/the-new-berlin-wall-heroes-earnings-assistance-and-relief-tax-act-2008/

  29. This may have been mentioned in another thread, so apologize in advance if I am repeating it here… I am soooo far behind in my reading… 🙂

    The Economist has a good editorial as a counter to all the hyperbole and stupidity coming out of Congress and some segments of the press let alone the comments I have read.

    Did Eduardo Saverin do anything wrong?
    Short answer, NO!
    http://econ.st/JDY4p6

    Mr Saverin is actually taking a bit of a gamble. This is a bet that his post-IPO shares will be worth more than his pre-IPO shares. There’s a good chance that he’s getting a discount relative to the prospective, immediately post-IPO valuation of his Facebook shares, due to the potential difficulty of offloading privately-held stock. But stocks go down as well as up. Should the value of his Facebook stock decline below the amount at which it has been valued for exit-tax purposes, Mr Saverin may end up having donated handsomely to the Treasury.

    Conclusion: America should be thankful, not demonizing.

    Thanks for everything, Eduardo. Enjoy Singapore.

  30. America the department of redundancy department. They already have an exit tax and the Reed amendment to keep people from reentering! Still think that the Reed amendment will never be enforced? My husband had a conversation with our US tax accountant after they had to have a big meeting (of course at our expense) to figure out why the IRS sent us two numbers for the same trust account. During the conversation she mentioned that another client had recently been refused entry to the US because she did not have a US passport.

  31. If it’s on the books, it’s only a matter of time before it’s enforced, especially if it’s related to the US. That place and those people are so prone to emotional outbursts just like they are having over Saverin.

  32. @bubblebustin well, there are so many complex laws in the US that no lawmaker can keep track of what is already on the books and what might be inconsistent with something else.

  33. A story from the New York Times…

    A Facebook Co-Founder Reflects on the Path Forward

    http://nyti.ms/J0ZpTH

    “I’m not a tax expert,” he said. “We complied with all the known laws. There was an exit tax.” That tax is based on the assets held by a citizen leaving America. The exit tax was intended to make sure the departing wealthy paid something before they decamped.

  34. http://taxpol.blogspot.ca/2012/05/civil-society-to-congress-end-anonymous.html
    ……..”TJN talks about how anonymous incorporation contributes to the US status as a tax haven:

    Corporate secrecy fundamentally undermines U.S. laws to combat money laundering and tax evasion, as well as U.S. efforts to tackle global corruption. A recent World Bank report found that the U.S. was a favorite destination of corrupt politicians trying to set up shell companies to access the financial system.”…….

  35. @badger…
    Thanks for that link. Think I will make a tweet out of it…

    While the IRS offshore jihad continues, the biggest #TAX evasion & fraud using anon Corporations is in U.S.A. http://bit.ly/Ki1ugX #FATCA

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