Wealth Flight: Facebook Co-Founder Saverin Renounces U.S. Citizenship to save Taxes

Roger Russell of WebCPA reports that Eduardo Saverin, a co-founder of Facebook, has renounced his U.S. citizenship prior to the company going public in a move apparently designed to limit his U.S tax liabilities:

The Brazilian-born resident of Singapore took the action last year, and his name appears on an IRS list of people who have renounced their citizenship as of April 30, 2012, according to Bloomberg.com.

The move was made well ahead of the announcement for an initial public offering for Facebook that will net Saverin hundreds of millions of dollars.

Saverin’s stake in Facebook, once 34 percent, is now approximately 4 percent. The IPO is predicted to raise $11.8 billion.

Some Americans are not happy about Saverin’s move says CBS News’ Bill Whitaker:

When Facebook begins selling its stock, several people who own part of the company will become billionaires.

One of them is getting a lot of flack, because he’s giving up his U.S. citizenship right before Facebook goes public. That will save Eduardo Saverin a fortune in taxes.

“The openness of our economy,” says Edward Kleinbard, a professor at the USC Gould School of Law, “the willingness to encourage and incubate start-up businesses, made Facebook worth what it is today and made him the extraordinarily wealthy man he is today.”

The news sparked outrage across social networks. Billionaire businessman Mark Cuban tweeted, “This pisses me off.” Journalist James Fallows tweets, “New candidate for most unlikable Facebook founder.”

Regardless of what you think about the ethics of Saverin’s move, what it proves is that when tax rates are high, rich people and job creators may decide to live and spend their money elsewhere. This fact of life should be taken into account in setting U.S. tax policy. Soak-the-richers should be careful what they wish for. They might soak the rich all the way to Singapore.

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