Some comments on this blog deserve wider attention. At most it seems that 10% of those reading the blog ever read the comments.
The following comment is one that does deserve that wider attention, being made this morning on yesterday’s story the the Association of Revenue & Customs (a part of the First Division Association — the senior civil servants union) has decided to campaign on the tax gap.
The clearly informed commentator said:
Richard, would you happen to know approximately how many people are working in the tax avoidance industry? There must be quite a few people with valuable knowledge of significant tax avoidance or evasion, who are in agreement with you about the damage that is being done to the economy in this way - and who would be willing to supply HMRC with information that would have a significant effect on the UK tax gap.
In the USA, the IRS have recognised this by introducing the “Tax Whistleblower Program” which provides proper compensation for those people who risk losing their jobs and who might compromise their personal safety by doing just this. There is a mandatory requirement for the IRS to pay a minimum of 15% of the collected proceeds, with a maximum of 30% and no ceiling.
Perhaps HMRC need to introduce such a scheme. They are aware that the revenue collected in the recent Liechtenstein case was out of all proportion to the costs involved in obtaining the information. The Permanent Secretary for Tax has himself commented publicly that the productivity per head of staff in those cases where informants are involved is in a different ball park compared with the investigations where they are not. It is an extremely efficient use of personnel.
In the UK there is a healthy scepticism surrounding the issue of informants, and perhaps we do not like to create instant millionaires in quite the same way as the USA does. So no doubt there would be resistance to the idea in some quarters. But which is the lesser evil? Mass public cuts, or or making payments to those who can assist collecting the right amount of tax in the first place? It doesn’t have to be 15% to 30%, it could be some other much smaller percentage to allow for the British reticence on this issue. The point is that the payment would be strictly by results and the person concerned would know that they would be remunerated accordingly.
Even a lesser program with minimum features such as a publicised scale of payments and a transparent policy could possibly have a significant impact. Currently HMRC have no open door for those who wish to report significant tax fraud, no transparency, very little encouragement and the informant has no certainty how they will actually emerge from engaging with HMRC.
Public spiritedness alone might bring forth a trickle of information, but for the real results some encouragement might be needed.
This is clearly an issue that needs to be considered in greater depth — but I do have considerable sympathy with it.
If we can pay rewards for information leading to the resolution of other crime, why not do so for information leading to the exposure of tax evasion?
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The problem is the commentator initially starts talking about the tax avoidance industry, and then muddles in tax evasion. The two are clearly different.
I think it would be a great idea to reward those who shop tax evaders, especially when to do so might easily lead to risk in personal safety. One would also hope it would provide an en excellent deterrent to evasion.
This really seem like a no-brainer.
It would be interesting though to understand the overall productivity of thes whistleblower programs. While certain campaign (like Liechtenstein) have been successful, there must a large number of instances in which the information obtained proves useless, only after considerable legal or administrative costs have been incurred. Is any analysis of the actual return on the IRS’ program available?
If we can pay credit rating agencies to snoop on the finances of benefit claimants and identify suspicious accounts– then we can certainly pay individuals for identifyng tax cheats.
No?
It is not widely known, but I think any person in the UK has a general legal obligation to report suspected money laundering by others if they are or could be in a position to be party to arrangements for that other person’s relevant crime, such as tax evasion. This obligation is not confined to persons in business such as accountants and lawyers – it applies equally to people in their personal capacities. The obligation is a requirement, not an option, and payment for the report is unlikely. 😀
So, if a cash in hand builder tarmacing the drive of your house asks for cash in hand, (and you suspect this is to evade tax of any kind) you must report this to the Serious Organised Crime Agency to get their permission to pay in cash or other advice how to proceed. And if you pay in cash then you have committed an offence and, further, if for example you simply say to the builder you can’t do it because it is illegal, you are potentially guilty of a tipping-off offence under the Proceeds of Crime Act. 😯
I am of course prepared to be corrected here.
Jason, here are some links to details of the IRS whistleblower program you may find to be of interest. As the report states, because the IRS must complete the investigation and collect the proceeds (and I believe there is a lengthy appeals process in the USA) before a claim can be paid, there is little co-incidence between the year of claim submission and the year of award payment.
The figures therefore have yet to fully reflect activity within the last two or three years and have to be studied with that in mind. I believe that the next annual report is due out next month. If I read the statistics correctly, it seems that $11,000,000 of tax was collected for each of the 14 personnel in the US tax whistleblower office in 2008, totalling around $155,000,000. Those figures would not have reflected the more recent enhancements to the program.
http://www.irs.gov/pub/whistleblower/annual_report_to_congress_september_2009.pdf
http://www.irs.gov/pub/whistleblower/whistleblower_annual_report.pdf
http://www.irs.gov/pub/foia/ig/lmsb/lmsb-4-0508-033.pdf
http://www.irs.gov/pub/foia/ig/lmsb/lmsb-4-1108-052.pdf
Also the figures may not be an accurate guide to the amount of tax that would be collected by a similar program in the UK because of differences in the two tax systems, usage of tax havens on the two continents, historic attitudes towards large company and individual tax fraud, etc. I am not sure what estimates there are of the US tax gap. It would certainly be very interesting to see what effect such a program would have on this side of the atlantic. I agree that it is likely to be a considerable deterrent to tax evasion. As HMRC can go back 20 years in some cases, the amount of revenue to be collected in the first year or so of implementation may make a very significant contribution to the tax gap.
Reporting evasion (known or suspected) is THE LAW.
I report every instance of a client claiming a deduction for non business expenses in their company, or taking loans or quasi loans without paying their 419 tax.
I do a money laundering report, give it to the MLRO partner. What does he do with it? I have no idea but I doubt they all find their way to SOCA. The statistics for reporting by accountants are feeble.
Why not increase the fines for failure to report known evasion to say 33% of the tax at stake? A win-win: – less evasion and some fine revenues. The carrot has not worked – lets try the stick.
Doh! We already have a statutory whistleblowing requirement!
To quote from HMRC’s own website:
“A tax arrangement must be disclosed [to HMRC] when:
it will, or might be expected to, enable any person to obtain a tax advantage
that tax advantage is, or might be expected to be, the main benefit or one of the main benefits of the arrangement
it is a tax arrangement that falls within any description (‘hallmarks’) prescribed in the relevant regulations
In most situations where a disclosure is required it must be made by the scheme ‘promoter’ within five days of it being made available. However, the scheme user may need to make the disclosure where:
the promoter is based outside the UK
the promoter is a lawyer and legal privilege applies
there is no promoter
The hallmarks are:
wishing to keep the arrangements confidential from a competitor
wishing to keep the arrangements confidential from HM Revenue & Customs (HMRC)
arrangements for which a premium fee could reasonably be obtained
arrangements that include off market terms
arrangements that are standardised tax products
arrangements that are loss schemes
arrangements that are certain leasing arrangements
arrangements for certain pension benefits
Upon disclosure, HMRC issue the promoter with an eight-digit scheme reference number for the disclosed scheme. By law the promoter must provide this number to each client that uses the scheme, who in turn must include the number on his or her return or form AAG4.
A person who designs and implements their own scheme must disclose it within 30 days of it being implemented.”
It would be very satisfactory if all the existing measures including those mentioned by Roger Rabbit, Alex S and Mr Snuffleupage actually worked. No doubt they do to some extent, but the existence of large scale tax evasion using offshore entities such as accounts, trusts, corporate structures etc is proven and this is why additional measures seem to be needed. I suppose if the system did what was expected of it then there would be no tax gap.
Leaving aside the nomenclature (avoidance or evasion) I assumed the commentator was referring to those situations that are not covered by DOTAS (referenced by @MrSnuffleupagus) or by the obligations within anti money laundering obligations re clients’ affairs.
I think the commentator is referencing those staff in the offices of organisations that create and/or actively promote disclosable schemes and also those whose bosses deliberately turn a blind eye to tax evasion in the form of, for example, lack of disclosure of taxable remittances, the true beneficial ownership of assets/businesses and other such situations.
The staff in such offices may well see and hear things that suggest their bosses (often the decision makers) lack integrity and may even be complicit in tax evasion.
Such staff may hesitate to shop their employer for fear of losing their job and future employment prospects.
Virtus, thank you for the data.
$155,000,000 feel like a drop in the ocean. The US economy is 15 or 20 times larger than that of the UK, so on the face of it the yield to the UK of a similar program would be at most $10 million, or £6 million.
That will take care of the deficit for less time than it took me to write this post…
We may still need some cuts after all.
@Mark Lee
Exactly why we need a protection scheme then!
Could you show the proof of the large sale tax evasion?
@Greg
HMRC say it is £35 bn or so
I say £70 bn
World Bank stats support me
Your refusal to recognise the issue is not to your credit
Jason is correct to point out that the figures given by the IRS in the September 2009 report do not in themselves support the notion that a “UK tax whistleblower program” would actually wipe out the national deficit. The statistics have to be handled cautiously though, for example – as Jason says the US economy may be 15 or 20 times larger than the UK – it does not follow that the US tax gap is 15 or 20 times as big. No reliable figures are likely to be available for the size of the tax gap in either case, but based upon the estimates available, the US tax gap would seem to be between around 2 and 5 times the size of the UK tax gap depending which figures you use.
What would be of interest is to obtain more data on the pattern of usage of offshore structures by UK based individuals and corporate structures, trusts etc relative to USA based entities. Statistics of that kind may show that offshore avoidance/evasion is more endemic here than it is in the USA, but not having such statistics I would not want to pre-judge it. Richard’s blog certainly seems to illustrate heavy usage of various EU and non EU tax havens by UK individuals and companies.
Table 2 in section V of the September 2009 report (“Whistleblower Awards Paid”) clearly states that the figures are based upon awards paid under the previous law (information received prior to December 20th 2006) now known as section 7623(a). Figures are not yet available for collections and awards based upon section 7623(b) which provides for the mandatory minimum of 15% of collected proceeds. Section 7623(a) provides for discretionary awards, which is similar to current HMRC practice. Section 7623(b) was introduced as the result of problems identified with Section 7623(a) — problems not yet acknowledged by HMRC.
I provided the links not primarily to prove conclusively that a “UK tax whistleblower program” would end all our problems, but to suggest a possible way forward and hopefully to open a debate upon the more general issue. The category of individuals enumerated by Mark Lee (above) with some considerable clarity would indeed be a prime target for a whistleblower program and this may be a very significant group of people, hence my original question to Richard about whether there was any way he could estimate the size of this group.
It is of interest to place oneself in the position of a potential whistleblower who may have noticed for example hundreds of millions of pounds escaping UK corporation tax because transactions are being routed through a “sham” offshore company. This may be the kind of situation perhaps where higher level control and management are said to be exercised in the tax haven but are actually being exercised within the UK without the knowledge of HMRC.
Our whistleblower will find great difficulty in making himself heard by HMRC and if — understandably — he does not want to identify himself at this early stage he will start to find obstacles and hurdles appearing in his path. Assuming that he finally manages to make contact with an interested person he will then be met with a system that is so severely lacking in transparency that he will be left unable to gauge whether he will be properly rewarded or compensated for the risks he is contemplating.
Most likely he will give up at this point and the tax fraud will continue. For the UK taxpayer that could be hundreds of millions of pounds of tax, back interest and penalties walking out of the door — and the likelihood that whatever he wanted to report will continue into the future. The taxpayer deserves better.
This is very similar to the “discretionary payment” environment which caused the introduction of Section 7623(b) in the USA and which we should be considering here.
There seems to be no better time.
@Alex S
“I report every instance of a client claiming a deduction for non business expenses in their company, or taking loans or quasi loans without paying their 419 tax.”
You must be reporting about 95% of your clients then…
@ Richard, do you have proof that the UK suffers £70bn in tax evasion?
The poster is stating that there is proof of such large scale tax evasion and if possible I’d like to see it. I will endeavour to research the World Bank stats myself.
@ Greg
I think HMRC estimate the total tax gap at 40bn as at March 2010 (which looks back at 07/08 tax year)
Most of this is evasion rather than avoidance – avoidance is stated as c.4.5bn, which is not an amount to be sneered at but not the rich pickings many seem to think
A whopping 11bn of the gap is VAT – carousel fraud, cash in hand etc
@Richard Murphy
The question I wanted to ask is why you think HMRC would be under-estimating the tax gap? Do you attribute to a deliberate policy on HMRC’s part or to incompetence?
@Mark Lee
As the numbers above show, if the idea Richard Murphy floats here is to be directed anywhere then surely it should be to closing the VAT gap. That’s the 800lb gorilla.
@Mr Snuffleupagus
Except for the fact that as all my other work shows – HM Revenue & Customs understate the other gaps by using wholly inadequate methodology
When the VAT methodology is applied to direct taxes the total evasion estimate is £70 bn consistent with the World Bank estimate that the UK shadow economy exceeds 13% of GDP
@Greg
Read the work
No one can prove the number
But the evidence is compelling
I can’t prove lots of things
But I don’t deny them
@Richard Murphy
Noted – although direct taxes are much, much harder to evade than VAT so presumably HMRC are justified to some extent in using a different methodology?
The reason I make the point is that when people in general think of tax evasion/avoidance they always conjour up images of evil businessmen in dark rooms surrounded by advisers dreaming up dastardly schemes. Now some of that does go on. But what goes on lots, lots more is people paying their plumber in cash. For some reason people think the former is much more morally offensive and culpable than the latter. But stopping the latter would provide much richer pickings for the tax take.
Time for a campaign from the Guardian to rat on cash settled plumbing work? I am not holding my breath…
@ Richard, thank you.
I unfortunately think that Virtus non Stemma is confusing avoidance and evasion. I’m not sure the whistleblower scheme would be at all successful for avoidance schemes (as opposed to evasion).
@ Mr Snuffleupagus, thanks for the figures. I’m surpised that evasion is a far greater percentage than avoidance.
@Richard Murphy
Hi Richard,
As I understand it, from the World Bank report, you take:
GDP * % shadow economy * % tax rate = evasion – is that correct?
Since that same report says “this paper does not focus on tax evasion or tax compliance due to time and length constraints” isn’t it a little more complex than that?
Also since they state the shadow economy is due to indirect taxes, direct taxes, size of government and fiscal freedom, does that mean that a lower tax rate on more declared activity may be preferable? Isn’t this tradeoff a bit laffer-ish?
@Greg
10bn is due to inaccurate personal and SME tax returns.
Some (much?) of this may be confusion, incompetence etc rather than wilful evasion.
I had to do PAYE for my daughter’s au pair and it was a bloody nightmare so I am not surprised many returns are inaccurate. I was gobsmacked by how absurdly complicated the whole thing was just to employ one au pair for 3 days. No wonder sole traders often want to stay that way!
This link takes you to HMRC’s report:
http://www.hmrc.gov.uk/stats/measuring-tax-gaps.pdf
@ Richard Murphy
I am still a bit confused as to why you think HMRC are so inadeuate. Surely if it was as bad as you claim the Treasury Select Committee would be all over them like a rash?
To avoid misunderstanding, let us focus on evasion only, and also enumerate here two examples of evasion where whistleblowers may perform a useful function.
Firstly the case where a wealthy UK resident maintains a bank account in a tax haven such as Liechtenstein or Switzerland. The funds may have been accumulated as the result of activity that should have been taxed but wasn’t, and the funds may be earning interest which should be taxed but isn’t. In either case our tax evader is practising deception as he is concealing the facts from HMRC. Our potential whistleblower may be found in the offshore bank, in an offshore financial institution that acts as a trustee, or possibly in the UK itself, and there may be other situations that don’t immediately come to mind. Legislation in the UK may theoretically already cover the situation as far as the UK is concerned, but may not be very meaningful in Switzerland or Liechtenstein.
Secondly the case where a “non-UK resident” company registered in say BVI or Jersey is being actively managed in the UK by UK residents who themselves are the beneficial owners of the company via offshore trusts that conceal the true ownership. HMRC are led to believe that the control and management of the non-UK resident company is taking place offshore whereas in fact the company is not genuinely non-UK resident as it maintains a place in the UK from which business is conducted. Corporation tax is being evaded as it is not payable by a “non-UK resident” company but would be payable if the true facts were known. Potential whistleblowers in this case are numerous. They would include employees of the company concerned, together with employees of banks, accountants, lawyers and in fact anyone who does business with the organisation both in this country or overseas and becomes aware of the true situation.
The IRS section 7623(b) would cover these situations as long as the likely tax, interest and penalties involved are estimated to be $2m minimum. The scheme is set up to handle tax fraud of significant value only.
Whatever legislation may currently be in place to prevent tax evasion it is clearly not working effectively or evasion would not be taking place. The exact figure can never be known due to the nature of evasion itself. The advantage of having a whistleblower program is that it works as a “fail-safe” or as a kind of final default. When all else fails, there may be a whistleblower out there to step into the gap.
Some crimes can never be solved without inside information, the same is true of some tax evasion.
@ Virtus non Stemma, the problem with your first scenario is that it is highly unlikey that the any of the people you mention would know if the client is declaring his assets and/or income, or whether the client actually has to make a declaration.
If the various people you mention do have proof that tax evasion is taking place, then they are bound to report it anyway.
(Note this is from a Channel Island perspective).
@Virtus non Stemma
“Whatever legislation may currently be in place to prevent tax evasion it is clearly not working effectively or evasion would not be taking place.”
That is not a very sophisticated or convincing argument. We have effective legislation to address unlawful killing but murders still take place.
@Mr Snuffleupagus
I’m sorry I don’t agree
if you suppress the top line you suppress the wages paid as well – which go out in cash and the tax on profit too
If you can evade VAT you always by definition evade much more
I can’t see how your logic flows.
See http://www.pcs.org.uk/download.cfm?docid=71E391EF-AA15-4032-966A39152975661D
@Noel Scoper
The WB did not extend their findings to tax evasion loss
But they defined the shadow economy as that activity undertaken to evade tax
So I could quite reasonably do so
@Mr Snuffleupagus
HMRC have no incentive to report the right number I am afraid – it would not show them in a good light
So I suspect the under reporting is deliberate, I regret to say
@Mr Snuffleupagus
My work has been debated in parliament twice (or it it three times?) since the election
I think it is being noticed
Search for David Gauke on this site and you’ll find the links
@Greg
The fact is they should know
they should have asked
that is the ethical and legal fault at the core of secrecy jurisdiction abuse
And you know it
The German government paid around 5 million euros for information on 1,400 account holders at LGT bank, Liechtenstein in 2007. They did not know before they received the information whether the majority of these 1,400 people were declaring assets or income – or whether they were in fact actually obliged to make a declaration. It seems from all reports that they had a very good return on their investment. Apparently LGT bank had 92 billion euros under management.
I don’t believe that to be true. Do onshore banks require their customers to show them their tax returns?
@ Virtus, you mis-understand my point. It is not the duty of a bank officer to check that a client is declaring the correct amount of tax to the correct authorities.
But if a bank officer knows a client to be evading tax, he is bound to report him.
@Greg
A bank has a duty to check they are not handling laundered funds
It follows they have the duty to ask
But instead they turn a blind eye
And when withholding under the European Union Savings Tax Directive takes place there is prima facie evidence of evasion being likely and every such case should always be reported
Suspicion is enough remember
So why don’t you do it?
@Richard Murphy
My thought process was that with much of the VAT fraud no top line is ever going to be reported anyway. Carousel fraud for example.
@Mr Snuffleupagus
Maybe not
But tax is still due on the profit…..
Unless recovered
And it’s also a small part of VAT fraud now
Richard, I agree 100% regarding the EUSTD. When I worked in a private bank, and the EUSTD was introduced, we had 4 clients (out of approx 500) who opted for the withholding tax. All were reported. I know that you occasionally visit Guernsey forums where you’ll see there is little support for non-local clients who refuse to have their details disclosed.
However you are incorrect regarding your angle on money laundering. KYC and source of funds documentation has to be produced, but proof of tax paid on the funds is not required. Why should it be? It’s not in the UK. If I sell my UK business and deposit the funds with Barclays (seeing as they are the flavour of the month!), the bank will quite rightly require me to prove where the funds came from but they will not ask to see what tax has been paid.
Greg, I apologise if I did not seem to have understood your point. I am happy to acknowledge that you know more about reporting requirements than I do. I was referring not in the main to those jurisdictions where more stringent reporting requirements are having a beneficial effect on the ability of a relatively “high tax” regime to collect taxes due, but to other offshore jurisdictions where this is perhaps not so much the case. Or earlier years for any jurisdiction when the reporting requirements were less stringent, as HMRC can and do look back up to 20 years. But in much more general terms I mean to include to all those situations, involving offshore activity or otherwise, where tax is being evaded.
The different point I was making is that a revenue authority such as HMRC or the Finanzamt would want to make its own checks on whether tax had been properly paid as the result of receiving whistleblower information and would not take anything received at face value. In the Kieber (Liechtenstein) case, it is quite possible that some of the 1,400 account holders were correctly submitting tax returns. Those people would not have been affected by the resulting investigation and would probably not even have been aware of it. The whistleblower activity resulted in a very significant benefit to the German taxpayer yet the whistleblower in that case had no knowledge at all of the tax status of the individual account holders.
@ Virtus, I see where you are coming from, and I actually think the idea is a good one if the whistleblower has definite knowledge of evasion taking place. The financial incentive could be the trigger that causes a person to act.
Greetings from across the Pond. I was perusing whistleblower websites and stumbled across this one. May I compliment the author and commentators on the high quality of the articles and commentary though there seems to be some misperceptions as to how the US tax WB system operates. You are really on to something but, respectfully, many commentators are getting lost in the weeds. The first step is to have a program that rewards whistleblowers handsomely. The information will flow in and capture all sorts of avoidance and a fair amount of evasion, based on the US experience. For example, UK residents that claim non-residency (a la Mr. Guy Hand) would be a prime target. The reasons why the WB reports, snitches, rats, acts pro patria, don’t matter a whit: its about the quality of the facts. Any promoter, investment bank, bank client liason officer, accounting firm, etc., that presents a scheme or plan would be at risk because he has immediately made each member of his audience a potential WB. Every tax manager, accountant, lawyer, advisor is also a potential WB. Think how fast that would clean up the huge problem that undoubtedly exists in the UK. These schemes rely heavily on secrecy and how can there be any of that when the potential reward for turning in the client is so attractive?
I work in the area as a consultant and, which has now become a cottage industry in the US due to the extremely high mandatory awards (15-30% of the recovery). Through April 2009, the value of claims submitted to the US Tax Whistleblower Office (WBO) was about $65B. It has jumped to over $100B according to as yet unpublished US Government report. The actual figure that will be collected by the IRS will probably exceed this as WB tend to be conservative in their estimates so as not to misrepresent the value of claims to the IRS and thereby risk retaliation for wasting the US government’s time. So, WBs will be rewarded to the tune of minimum approx $10B to max $20B. Since there were approximately 1500 WBs that would average to between $7M to $14M per WB. Obviously, this is simple match and some claims are worth more and some are worth less, but the point I was trying to illustrate is the scope of the reward claims. I wager that there are similar claims that are lying in wait in the UK even if the volume of claims is not as high as in the US.
To make the situation worthwhile, legislation would need to set a dollar minimum limit. In the US this is $2M. This weeds out the small claims where the recovery is not worth the time involved. In fact, in my experience, to get the WBO office interested in the US, the value must be at least $20M of taxes avoided.
Transparency of the claims process is key to its success. The IRS was hostile to WBs. It makes them look bad for not catching the crooks before the WB walked in the door. However, that attitude has changed as the benefits of the glory of catching tax cheats has really turned their corporate heads. After all, it makes them not the WB (who remains anonymous) look good. They are not searching around looking for the issue-the specific WB information makes less not more work IRS agents, something remarked to me recently on a case. However, the process needs to be overseen by the courts to make sure WB don’t end up on the wrong side of Government wrath.
Rumour has it that the US WBO has been in secret discussions with HMRC for a number of months discussing the possibilty a UK WBO, based on some White Paper published by the Blair government.
Finally, remember if you have knowledge of US wrongdoing using for example, UK shell corporations or partnerships or trusts a reward may be waiting for you in the US! Of course the US would likely tax you on any reward, but 65 percent of a lot is also a lot. And then you could profess to live in Guernsey and begin the cycle all over again!!
Mr T Grasser, your contribution to this debate is very welcome, you are obviously able to give us – here in the UK – a rare insight into some of the workings of the US system. You did not say whether you are actually from the IRS or whether you are from one of the many legal firms that interface with the IRS – by representing the WB. Either way I believe you are an important commentator and hopefully you can tell us more about the US experience.
The figures that you give are really quite astounding. Claims of over $100 billion for the single year ended April 2009 would suggest a noticeable contribution to the US deficit, not just the actual annual tax gap. Is it further possible that you might actually mean the aggregate claim value rather than the uncollected tax itself? If the latter, then the situation is even more interesting as that would suggest uncollected tax in the region of $300 to $600 billions.
There is always going be a difference between tax due and tax actually collected, also the US appeals process is lengthier than it is here. There are a number of factors that would work to modify the eventual statistic. Not only that but the statistics themselves require very careful analysis as the year in which claims are made is not the same as the year in which the proceeds arrive.
Nevertheless the seriousness of this contribution to the US tax gap seems to be undeniable — and as one poster here has commented, it really seems to be a “no-brainer” for us. The UK economy is smaller and as you say the likely volume of claims would be correspondingly smaller. But like you I would guess that there are some huge amounts ready to spill out of the woodwork. Furthermore, because our HMRC are able to look back over 20 years in the case of deliberate concealment, the benefit in the first few years of implementaion could be quite interesting — to put it mildly.
So why aren’t we doing this. What is it that is different about the US.
Well, firstly you don’t seem to have such a powerful tabloid press. Taking your average figure of WB payments of between $7 to $14 millions per WB, it is easy to see a moral outcry along the lines of “Government pays 10 million pounds to Whistleblower!!!” — conveniently putting aside the fact that the government might have collected between 30 and 60 million pounds sterling (that it would otherwise have never seen) from that one WB alone. Let us imagine that the UK government were happy with say a mandatory minimum 2% inducement rather than the 15% minimum built in to the US system. We’d still be looking at this kind of headline even though the government were then collecting fifty times more than they were paying out to the WB.
Can you tell us how the US taxpayer perceives the US tax whistleblower program? Is it generally recognised that — like other serious crime where secrecy prevails — if you want to get the upper hand then you have to pay for information that would otherwise be unavailable. (When I mention serious crime, I am referring to large scale deliberate evasion aka tax fraud) Is it possible that the American public are less tolerant of “tax havens” than we are here? Now that the results are starting to come online, has public perception of the program changed? Does the government make any statements as to the overall benefit of the program, or are they likely to do so when the unpublished report you mention becomes available. The last report appeared in September 2009, so you are presumably referring to the next annual report due shortly.
Your point about the IRS being initially hostile to the WBO is interesting. I don’t know whether this would be the case here with HMRC if a “UK tax whistleblower program” was introduced as there are some very real incentives at the current time to moderate the program of public expenditure cuts. You make a very powerful point that the initial hostility because “it makes (the IRS) look bad for not catching the crooks” was quickly moderated when the benefits started to roll in and the sheer efficiency of the exercise became apparent.
Can you possibly expand upon the point you make about the “WB ending up on the wrong side of government wrath”? This may be a reference to some early problems you’ve had that we could learn from.
Hopefully you can assist further with this debate.
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