Time for whistleblowing?

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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?