The FT reports in an email this morning that:
A whistleblower who helped expose false accounting at Deutsche Bank has turned down a multimillion-dollar award from the Securities and Exchange Commission in protest against the agency's failure to punish executives at the bank.
The spurned sum amounts to millions of dollars. I can only presume that the whistleblower in question is in the fortunate position of being financially secure despite his actions. If so that is exceptional: most whistleblowing comes at considerable personal emotional and financial cost, including the loss of a job and reduced chance of finding another one. This, unsurprisingly, deters people from whistleblowing and yet time after time we know that some of the best data that not only leads to prosecutions but also changes behaviour comes from whistle blowers. Think of recent tax haven disclosures from HSBC and Panama and that is obvious.
This is precisely why I have always said that tax whistleblowers should be paid. I think the minimum should be ten percent of the sum recovered. The option to pay up to thirty percent if the risk from making disclosure is high shoukd be available. The tax penalty regime alone should cover the cost, but that's not the point. Three consequences would follow.
First there would be more disclosures.
Second HMRC would be under more pressure to act: public pressure would demand it.
Third the quality of leads should improve.
The result would be greater tax compliance and a change in taxpayer begaviour as perceptions of risk changed. That has to be a win. Which is why we need to put proper whistleblowing reward arrangements in place.
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Panama was a hack, not a whistleblower.
The impact remains the same
And we do not know which it was for certain
An acquaintance who lives in the neighbourhood (and is quite well off) was mouthing off in the pub a few days ago about some tax avoidance scheme he is involved in. He was telling us the details but I didn’t understand it. Seemed proud of himself – told us it was all ‘perfectly legal’.
He was maybe a bit tipsy but not so drunk that he didn’t know what he was saying.
What should I do about this? What is the ethical course?
Is there someone I should report it to?
HMRC have a tip off line
Interesting.
As for those who actually do the deed it seems that only depriving them of their liberty will work instead of the fines that are imposed – fines that they can obviously afford.
” ….I can only presume that the whistleblower in question is in the fortunate position of being financially secure despite his actions ”
Apparently not . He claims he needs it to maintain his family and to “.. share with his ex wife” (?!)
Possibly a condition of the pre nup ?
Even more bizzarely he has asked the SEC to return his share to Deutsche Bank shareholders whom he claims are the real losers. (!). He says he will only acceot it directly if it can be proven the funds were re – taken from the bonuses paid to the named management culprits.
It’s interesting that the Proceeds of Crime legislation imposes a legal obligation on advisors acting in the regulated sector to “whistleblow” and there is no question of reporting advisors being offered a pay-out. Quite the opposite case applies, fines and time spent at Her Majesty’s pleasure. As the reporting advisors – doing the right thing – will no doubt choose to disassociate themselves from offending clients, and lose income as a result, should they not be compensated?
Whilst I believe that we all have an obligation to make an appropriate contribution to the society in which we live, pay our taxes, I’m not sure that I want to encourage folks to be rewarded for ratting on their neighbours. And yet what is the alternative? Lassize-faire capitalism, it has to be noted, has failed miserably at protecting the rights of its citizens, unless they happen to control significant chunks of its cash.
Is it not the faceless corporations that are most at blame for side-stepping their moral imperative to contribute and yes, let’s reward employees who put their jobs at risk and open up their employer’s Pandora’s Box. I would take your proposal further, Richard, and pay them 10% of all ongoing savings to the Exchequer…
Should the