A Response to the Eduardo Saverin Story

Following a link in a comment at the Isaac Brock Society, I came across this article in the Grauniad.  I could not help but comment, as follows:

As was mentioned by Tim Worstall, by renouncing his citizenship, he has already paid an exit tax on the <i>unrealised</i> capital gains of his share in Facebook. He was taxed on what his estate would have been valued on the day of his renunciation.

The requirements for filing taxes for anyone who has ever had a green card or US citizenship are pretty onerous when they live outside of the US. I am a dual British citizen with my own business. I do not make a lot of money. But because I am also American, the US government wants to know everything about every financial transaction I’ve ever had anywhere in the world. I cannot invest in a tax-efficient US pension because I do not have a US address, and I cannot invest in tax efficient British pensions or ISAs because that is considered taxable income in the US. The most I am pretty much allowed to do, legally, is to have a current account and a savings account. And even that is probably going to be taken away because of a new law called FATCA which will require reporting by banks anywhere in the world to the IRS on their US persons.

Many banks, in order to remain compliant for the least amount of effort, are refusing accounts for American persons. Because if they are not compliant, <i>any</i> money that flows through their American entities will be withheld at 30%. So rather than adjust all their payment systems to be able to report on their US-linked account holders, they are just getting rid of their US-linked customers. It’s a lot cheaper.

I suspect Saverin renounced his citizenship over FATCA and not because he was avoiding tax. FATCA means that if any non-American company or organisation were to give fiduciary responsibility to an American-linked person or have him on the board, they will have to disclose their accounts to the US Government, beginning in the next couple of years. – Pay attention all you Barclays account holders and investors, Bob Diamond falls into this classification.

FATCA is essentially a tax regime imposed upon non-Americans, and could very well be a financial neutron bomb on the liquidity of the banking system.

In the mean time, the British Banking Association and HMG aren’t doing much to resist FATCA on your behalf except to moan that the timescales for implementation are too short. They are bending over backwards to try to comply with the US.

The double-taxation of US citizens also means that those who could be more economically productive where they live choose not to be. In Britain, it more or less means that a British US person who earns over around £65k is paying an effective 75% income tax on anything above that. If he chooses not to earn more than that, then that is 40% of income tax being denied to the Exchequer on anything above that. Double taxation also means that he can’t invest in British business the same way a fellow Brit can.

<i>US taxes are even now sucking money out of the British economy and the Exchequer.</i>

And FATCA is only going to ensure that it gets worse.

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2 Responses to A Response to the Eduardo Saverin Story

  1. Thanks for link to the Guardian article – another flame-blame that knows Saverin’s mind better than he does himself since he couldn’t possibly be serious about leaving the US unless it was to avoid taxes, no matter what he says. And then more comments that show that so many people in the US think that no other place provides for opportunity, no other country provides a safe haven (not I did NOT say tax haven) and that no other country has a judicial system. More bullhooey. I’m getting tired of it all. I agree with your premise that it was FATCA (and associated rules, regulations, laws etc) and probably FBAR that prompted his move. After all, he’s been living in Singapore for a few years now (some reports say 2009, some 2010, hard to know what is hard fact and what is rumour around all of this). In the meantime, regular folks are getting tarred with the same reactionary negative brush. No wonder banks in other countries don’t want US persons banking with them! It’s a very sad state of affairs.

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