As the Telegraph reported this morning:
HM Revenue & Customs has been handing out hundreds of thousands of pounds a year in the little-known bounty payments as public concern about who pays their fair share has grown.
Rewards to members of the public rose by more than a fifth, to £374,000 in 2011-12, compared with the previous financial year, HMRC figures released to Exaro, an investigative website, show.
It's been suggested re than £40 million was recovered as a result - suggesting payments may be less than 1% of sums recovered.
No wonder the system does not work well enough. Compare with the USA:
You’ve probably read about IRS whistleblowers cashing in for reporting suspected tax fraud. It may seem to be anew development, but IRS whistleblowing incentives started in 1867! Still, big changes in 2006 raised the stakes materially, adding new Section 7623(b).
Under it, awards to whistleblowers are no longer discretionary. Now, the whistleblower “shall” receive 15 to 30 percent of the collected proceeds. That’s shall,not may.
Now there are still problems with their system, but the reality is that we have a long history of paying for information that leads to the successful prosecution of crime and we are talking about crime here for that is what tax evasion is.
And that's why I think we should have a stronger and more formalised system here so that those who know of tax abuse have an incentive to report it and the risk for those doing it is increased.
What about those who know and don’t say? I’m not talking about the ordinary employees but those in the most senior positions? What is the incentive for them to report? They might have to appear before a committee of Parliament or take early retirement with a large pension?
We don’t see many going off to H M P Dartmoor. Or am I becoming a curmudgeonly old buffer in danger of sounding like a Telegraph reader?
Those who work for them need to know that they can retire if they talk
Might be a case for opening up HMRC offices in tax havens like Luxembourg or the Cayman Islands alongside PwC, KPMG & Deloittes offices etc. Even if advertised bounties to whistleblowers were 3% (or even 0.3%) of collected proceeds rather than the IRS statutory 30%, HMRC could see quite a lot of business from passing accountants who might be thinking of retiring. Can’t you just imagine the chorus of protest this would bring forth.