Senate bill would punish 'tax dodgers'

Two senators Thursday denounced Facebook Inc. co-founder Eduardo Saverin as a tax dodger for renouncing his U.S. citizenship ahead of the company's initial public offering, and introduced legislation to punish him and others who leave the country to duck big tax bills.

Among the penalties would be a ban on re-entering the United States for anyone that the Internal Revenue Service determined renounced citizenship to avoid paying taxes.

"This is a great American success story gone wrong," said Sen. Charles Schumer (D-N.Y.). "Mr. Saverin wants to de-friend the United States just to avoid paying taxes, and we're not going to let him get away with it."

Schumer said Saverin could save $67 million to $100 million by renouncing his citizenship and moving to Singapore, which has no capital gains taxes.

So Schumer and Sen. Robert Casey (D-Pa.), said they will introduce the Expatriation Prevention by Abolishing the Tax-Related Incentives for Offshore Tenancy Act, also known as the Ex-PATRIOT Act.

Any person with a net worth of $2 million or an average income-tax liability of at least $148,000 over the previous five years who renounces U.S. citizenship would be presumed by the Internal Revenue Service to have done so to avoid paying taxes. The person would have to prove otherwise to the IRS.

Anybody who could not prove another reason for renouncing citizenship would face a 30 percent tax on future capital gains on U.S. investments and be barred from receiving a visa to re-enter the country.

Saverin, in his first comments on the controversy, told The New York Times on Wednesday that his move "had nothing to do with taxes."

"I'm not a tax expert," he said. "We complied with all the known laws. There was an exit tax."

But Schumer and Casey said they believed Saverin renounced his citizenship to save millions in tax payments from his share of Facebook stock. They said his move was even more galling because Saverin came to the United States as a boy because his family feared kidnappers in his native Brazil.

"I think it's clear to anyone looking at this across the country that this is an insult to the American people," Casey said.

A 1996 law allows the attorney general to bar anyone from re-entering the country who renounced U.S. citizenship to avoid taxes. Schumer said there is no mechanism for the attorney general to determine that tax avoidance was the reason for renouncing citizenship.