Uncovering Tax Evasion Through Whistle Blowing

Whistleblowers have demonstrated their effectiveness in nabbing tax evaders, unlike external investigations. The UBS AG banker’s tax evasion techniques were uncovered through Bradley Birkenfeld, who provided crucial information to U.S. authorities on the bank’s suspicious transactions. Such employees bring to light the approaches banks and their cunning clients use in evading taxes, making these methods obsolete for exploitation in the future. The 2006 law, which states the Internal Revenues Service can pay up to 30% of the collected proceeds to a whistleblower, effectively incentivizes company employees to unravel unethical practices. Moreover, the $104 million payment issued to Bradley Birkenfeld would enhance the cooperation of the institutions’ workforce with the U.S. authorities during tax evasion investigations. The inquiries in Switzerland have depreciated the suitability of the financial sector, which was desirable in that it facilitated tax evasion among wealthy individuals from different global regions. As a result, these services declined by 25% in the past two years. Not willing to give up, the tax evaders have shifted their operations to other tax havens such as Monaco, Cayman Island, and Asian countries.

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Tax evasion will persist as long as tax havens exist since individuals are unwilling to service their tax obligations fully. Interestingly, those involved in this unethical practice include influential people such as celebrities, and politicians, seeing that officials from both Russian and Chinese governments were involved, as revealed by the Panama Papers. This exposure was facilitated by journalists’ accessibility to records by a law firm from Panama. The International Consortium of Investigative Journalists published reports on tax evasion by wealthy individuals. The legal issue does not lie in owning an offshore company but in using it as a channel for tax evasion. Therefore, the U.S. and other governments have a long way to go in addressing tax evasion since financial institutions and their wealthy clients innovate new approaches to this illegality.

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Offshore Tax Evasion and Piercing the Veil of Swiss Bank Secrecy

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Uncovering Tax Evasion Through Whistle Blowing

UBS Whistleblower Gets $104 Million (Links to an external site.) Now a Felon, a Former Banker Told U.S. About Tax-Evasion Tactics by UBS and Its Wealthy Clients
- A former UBS AG banker who helped the U.S. government unleash an international crackdown on tax evasion was awarded $4 million in what is believed to be the largest ever span whistleblower payout to an individual.
Credit Suisse Pleads Guilty in Criminal Tax Case (Links to an external site.) Credit Suisse Group AG became the first financial institution in over a decade to plead guilty to a crime Monday when the Swiss bank admitted it conspired to aid tax evasion and agreed to pay a.6 billion to settle a long-running probe by the U.S. Justice Department.
The Panama Papers Scandal (Links to an external site.) Panama Papers (Links to an external site.) at a glance:
- What are the Panama Papers?
  - Late Sunday, a huge batch of reports linked 140 public figures, executives, and celebrities worldwide to overseas assets in offshore tax havens ranging from the British Virgin Islands to Panama. Iceland’s prime minister has resigned, while Russian President Vladimir Putin’s spokesman deflected criticism. More political pressure is likely to follow.

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The WSJ articles above show some scopes of offshore tax evasion, a significant tax gap issue today. Thus far, the IRS has collected over 11 billion dollars, and over 54,000 offshore disclosures have been made since Mr. Birkenfeld’s case. The first Panama Case convictions began this year and are ongoing. 84 Swiss banks have signed deferred criminal prosecution agreements with the Department of Justice. https://www.justice.gov/tax/swiss-bank-program (Links to an external site.)

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