Eduardo Saverin, the billionaire co-founder of Facebook Inc. (FB), renounced his U.S. citizenship before an initial public offering that values the social network at as much as $96 billion, a move that may reduce his tax bill.
This year, nearly 2,000 U.S. expatriates have renounced citizenship, more than in the previous 25 years. The top 0.1% now average four nations of residency (eight weeks or more per calendar year), so they can and do move from home to home with ease.
Rich Americans renouncing U.S. citizenship rose sevenfold since UBS AG (UBSN) whistle-blower Bradley Birkenfeld triggered a crackdown on tax evasion four years ago.
About 1,780 expatriates gave up their nationality at U.S. embassies last year, up from 235 in 2008, according to Andy Sundberg, secretary of Geneva's Overseas American Academy, citing figures from the government's Federal Register. The embassy in Bern, the Swiss capital, redeployed staff to clear a backlog as Americans queued to relinquish their passports.
Interestingly enough, France is experiencing even greater flight of wealth, which is going to affect any new tax revenues the new government had hoped to raise. Under EU laws, citizens can relocate and cannot be penalized. So far, the migration seems to be to Germany and England in the EU and to Australia and Canada from the U.S.
The effective tax rates at the high-end of things is lower in those nations than in the U.S., though the nominal top marginal rate is higher. It's all about how you juggle the money.
The super rich no longer have "roots" in any nation, with their four houses in various nations. "Global citizens" might care more about the world as a whole, but I'm not sure that's the case. Instead, they will use this mobility as a threat: "Don't raise taxes or we will take our money and companies elsewhere."
Something nations will need to consider.