Senate announces plan to stop Facebook co-founder from dodging taxes by dropping US citizenship
Facebook co-founder Eduardo Saverin’s renouncement of his US citizenship has caused “outrage” with two US Senators. Senators Chuck Schumer and Bob Casey have introduced the Ex-Patriot Act. In addition to imposing a 30% income tax on future capital gains, it also provides that ex-citizens who gave up their citizenship be refused entry into the US if the reason for giving up their citizenship was for substantial tax avoidance purposes.
This “outrage” fails to acknowledge that the US already has an “exit tax” in place which is imposed at the time a citizen expatriates. Plus there has been in place for many years what is known as the “Reed Amendment” which prohibits expatriates from entering the US if the Attorney General determines that the expatriation was for the purposes of tax avoidance.
The new proposed legislation transfers the “decision” making process from the Attorney General to the IRS, and is retroactive—applying its provisions for expatriations for the last 10 years.
As far as we can tell, the Reed Amendment’s provisions have never been used; it is perceived as virtually unworkable. The new proposed rules could prove to be equally as complex—especially its retroactive provisions.
This sort of legislation “looks” politically good, and may be the type of legislation that both Republicans and Democrats could agree on….who is there to complain? Especially in an election year!
This is an issue that is not likely to go away. You can read Senator Schumer’s press release below.