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By Kevin Drawbaugh
Thu May 17, 2012 4:34pm EDT
WASHINGTON (Reuters) - Facebook co-founder Eduardo Saverin, under fire over the tax consequences of renouncing his U.S. citizenship, said on Thursday he is obligated to and will pay "hundreds of millions of dollars in taxes to the United States government."
The social media entrepreneur and investor said in a statement, emailed to Reuters by a spokesman, that his decision to move to Singapore was "based solely on my interest in working and living" there. Saverin said he has been there since 2009.
Facebook Inc is poised to make its public debut in the stock market on Friday, after pricing on Thursday at $38 per share. Saverin, 30, stands to make a fortune.
Saverin's spokesman declined to comment when asked what portion of the millions of dollars Saverin said he will pay in U.S. taxes are related to the initial public offering.
He was accused on Thursday by two U.S. senators of dodging taxes on his Facebook stock-market profits.
Bloomberg first reported last week that Saverin had renounced his citizenship and, in so doing, may avoid U.S. taxes on the widely anticipated IPO.
In the statement, Saverin said: "I have paid and will continue to pay any taxes due on everything I earned while a U.S. citizen. It is unfortunate that my personal choice has led to a public debate, based not on the facts, but entirely on speculation and misinformation."
"As a native of Brazil who immigrated to the United States, I am very grateful to the U.S. for everything it has given me ... I will continue to invest in U.S. businesses and start-ups, and believe and hope that those investments will create many new jobs in the U.S. and globally."
The IPO could leave Saverin, still a part-owner of Facebook, with a big capital gains tax bill.
Saverin's new home of Singapore has no capital gains tax. The long-term U.S. capital gains tax for high-income Americans is a minimum of 15 percent.
Senator Charles Schumer told a news briefing on Thursday: "It's infuriating to see someone sell out the country that welcomed him and kept him safe, educated him and helped him become a billionaire ... We plan to put a stop to this tax avoidance scheme."
Schumer and Senator Bob Casey, both Democrats, said at the briefing that they were proposing legislation to crack down on what they see as expatriate tax avoidance.
Under the bill, expatriates worth $2 million or more, or with average income tax liability exceeding $148,000 over the past five years, would be presumed to have renounced their citizenship for tax avoidance purposes.
These high-income expatriates would get a chance to prove otherwise to the Internal Revenue Service, but if they could not do so, then they would face a 30-percent tax on future investment gains, no matter where they were residing.
So long as the taxpayers failed to pay these taxes, they would not be allowed to re-enter the United States.
"We simply cannot allow the ultra-wealthy to write their own rules," Casey said.
"Mr. Saverin has benefited greatly from being a citizen of the United States but he has chosen to cast it aside and leave U.S. taxpayers with the bill. Renouncing citizenship to simply avoid paying your fair share is an insult to middle class Americans and we will not accept it," he said.
HATCH SPOKESWOMAN: TAX REFORM THE ANSWER
Antonia Ferrier, a spokeswoman for Senator Orrin Hatch said the Schumer-Casey bill was a talking point rather than a real solution.
"The root cause of the problem - an archaic tax code and massive tax burden that incentivizes people to do something like this - must be fixed," said Ferrier. Hatch is the top Republican on the Senate Finance Committee, which oversees tax policy,
In a related matter, Democratic Senator Carl Levin criticized in a written statement the tax deduction that Facebook will get via its IPO, estimated at $16 billion.
That would result, he said, from a loophole that lets companies claim a stock option tax deduction greater than the expense shown on their books. Levin and other lawmakers have filed legislation to close this loophole, but it has made little headway in the Senate.
Broader proposals to reform the complex U.S. tax code for the first time since 1986 also have not advanced in Congress, with lawmakers at a stalemate on a range of issues because of stubborn partisan divisions on tax and spending policy.
(Reporting by Kevin Drawbaugh; Editing by Tim Dobbyn)
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