The New York Times
By divulging the schemes that UBS used to encourage American citizens to dodge their taxes, Mr. Birkenfeld led to an investigation that has greatly diminished Switzerland’s status as a secret haven for American tax cheats and allowed the Treasury to recover billions in unpaid taxes.
In addition to paying $780 million in 2009 to avoid criminal prosecution, the bank turned over account information regarding more than 4,500 American clients.
The significance of this payout cannot be overstated. Whistle blowing hasn’t been a significant paying proposition until now. It’s been a lousy option, in fact, a sort of platonic payback with a lot of downsides. Whistle blowers have usually been put through a lot of grief before and after they blow their whistles, and they rarely get much in the way of material incentives to do so.
The IRS has also provided a road map of the values to be obtained from whistle blowing. Not all regulators are in the same position as the IRS, but it’s the regulator in the front line dealing with the severe damage to America’s revenue system caused by tax cheats and financial rorts.
There are endless guesses at the amount of money involved in tax scams and other types of fraud designed to avoid American taxes. The guesses all include the word “trillions”, however. The gigantic sums parked offshore in tax havens and under-the-radar accounts are constant sources of amazement to financial journalists when the subject is raised in the media.
Real regulation comes in two forms- Adequate protection for citizens and adequate results when enforcing law. Bureaucracy has nothing to do with it except at the superficial “rulebook” level, which simply sets out what’s supposed to happen. Enforcement involves making sure that people play by the rules and finding practical ways of doing so. Whistleblowing is very practical and very simple.
In practice, tax evasion is so much a part of the culture of money in the US that it actually affects the fiscal state of the nation. The US deficit didn’t happen overnight. The revenue base has been progressively undermined by tax scams for generations. The Swiss bank accounts were almost folklore before anyone actually did anything about them. They were status symbols.
Those trillions of dollars in tax hideouts, if taxed, would generate a trillion or so that the nation desperately needs. Enforcing tax requirements will also provide some useful updates to case law, getting the antiquated 19th century-style laws up to speed with 21st century tax evasion.
This is where practical whistleblowing comes into play. It’s hard to visualize a more appropriate way of handling the maniacal money industry. Turning whistleblowing into a paying proposition will be a massive game changer. It can be used internally in the sleazy world of finance as a weapon against enemies. It will encourage those with information to come forward. It’s a game changer.
Bradely Birkenfeld’s case will open the floodgates. So much money, and so much greed, with so much money as a reward for exposing it. It’ll be interesting to see how the holier-than-God tax evaders respond to this case, too. Will there be an impassioned defence of UBS and its clients from Senator Nobody? Will Congressman/woman/object Whatsisname demand justice for their sacred tax evaders?
I don’t think that’s in the playbook for the “Money good- People bad” mindset. Those who aren’t running for cover will be running for the phone, not making speeches.
Meanwhile, if you’ve got a whistle, blow it. It’ll be worth it for the entertainment value alone.