Canada has started to modernize its whistleblower laws by adopting a limited rewards program for whistleblowers that report specific tax law violations.
Unfortunately, the program is weak, and most likely will fail. The program lacks some of the most important features found in the U.S. whistleblower rewards programs, most importantly, the rewards are neither mandatory nor enforceable in court. They are discretionary.
The United States had a similar tax whistleblower law since 1867. It was a complete failure. The lack of mandatory requirements and judicial review of a denial rendered the law toothless. Almost no rewards were ever paid, tax whistleblowers were neither protected nor incentivized and the program failed to promote compliance with tax laws. In 2006 the law was amended, making rewards for qualified whistleblowers mandatory, and giving whistleblowers the right to judicial review.
A similar history plagued the U.S. Securities and Exchange Commission. In the 1980’s Congress enacted a bounty program for insider trading cases. The rewards were not mandatory, and there was no judicial review. In over 20 years only four rewards were given, totally approximately $250,000.00. The law was considered a complete failure, and the lack of whistleblower protections was viewed as one of the causes of the scandals and market manipulations that highlighted the 2008 crash.
In 2010 Congress fixed this law in a similar manner as the IRS tax law. Rewards were made mandatory if the whistleblower provided original information that formed the foundation of a successful enforcement action, and the denial of a reward could be challenged in court. The 2010 law, known as the Dodd-Frank Act, covers violations of the U.S. Securities Exchange Act and the Commodity Exchange Act . It also covers violations of the Foreign Corrupt Practices Act. The law has a transnational application, and over 1000 foreign nationals have filed claims, including 167 from Canada.
We fear that without mandatory rewards and the right to judicial review Canada’s program will follow the same path. We hope not. We hope that dedicated public servants who understand the importance of protecting and rewarding whistleblowers staff the program. However, the rule of law is not based on hope and good intentions. The Canadian government should be pushed to create fair and effective whistleblower laws designed on the highly successful U.S. models. Information on how to use the Canadian program is linked here:
- How to submit information to the Offshore Tax Informant Program
- Confidentiality of information
- The informant award process
- Eligibility for the Offshore Tax Informant Program
- Payment criteria
- What is international tax non-compliance?
Information on U.S. laws reward laws for which Canadian whistleblowers may be eligible are linked here: