I haven’t even heard of Eduardo Saverin until around a few weeks ago. Now, I feel compelled to write a story about him. Well, not really about him. My little tale is whether or not his conduct qualifies him as a tax cheat.
As he renounced his US citizenship, Saverin was vilified. But, there were also those who applauded his decision. Those on the far right hail him as a hero. Those on the far left dub him a traitor. Many of those in between seem to be confused.
Now, let’s think about it. What has he exactly done that makes him a hero? By the same token, what has he done that falls under the crime of treason? There are plenty of reasons why a citizen may want to renounce his or her citizenship, American or any other. In the spirit of this blog, I would like to limit my discussion to tax related reasons.
Taxes have to do with one’s legal responsibility. Like them or not, you must comply with all the tax laws applicable to your specific situation. You must file all necessary paperwork, as well as pay required taxes.
Compliance, however, doesn’t mean that you have to pay a red cent more than the tax laws require. Paying more taxes than you owe has nothing to do with patriotism and/or heroism. Doing so is simply foolish. It is also irresponsible.
As an individual, your primary responsibility is you, your family and those you love. Less taxes simply means more wealth for your family. If you are in charge of a business, your primary responsibility is to its shareholders and owners. Corporate tax savings mean more income to the company and its owners.
Pointer 1. Paying more taxes than the law requires is neither heroic nor patriotic.
Saverin said the decision to renounce his US citizenship was not triggered by taxes. Yeah, right. Many others, yours truly included, think otherwise. But, does it make Mr. Saverin any better or worse if his real purpose was to save a fortune in taxes?
It seems Singapore has no capital gain taxes. Hence, if Saverin chooses to sell some of his Facebook’s shares of stock at a $100 million profit, he can keep the entire amount for himself. Currently, Singapore has no estate/death taxes. In the event of death, his property would be transferred to any heirs of his choice tax free. Do the math. Even if you believe Warren Buffett’s tax rate fables, this is big bucks.
Some folks don’t even save any tax money by renouncing their US citizenships and permanent residency status. Instead, they do it to escape additional compliance paperwork and related headaches.
It is important to understand the difference between tax avoidance and tax evasion. The term “tax avoidance” boils down to minimizing you taxes by means the law permits. It is even perfectly OK to eliminate you taxes altogether, as long as you follow the rules. By contrast, the term “tax evasion” refers to intentional violation of law. Evading taxes is a criminal act.
Tax avoidance is your right. Tax evasion is a crime punishable by law. Equating the two acts is simply wrong. If Mr. Saverin did what he did to save taxes, then he simply exercised one of his rights. There is nothing sinister in doing so.
Pointer 2. Tax avoidance and tax evasion are two different animals.
It seems that Eduardo Saverin has not violated any American tax laws. In my book, this doesn’t make him a hero. But, minimizing his taxes doesn’t make him a villain, either.
