The National Tax Service (NTS) of South Korea has two whistleblower reward programs to crack down on tax fraud. One program, Tax Evasion Informant Reward Program, enacted in 1951, provides the highest award percentage of all NTS reward programs. The other program, Foreign Financial Account Report Reward Program, established in 2012, covers foreign accounts. South Korean whistleblowers have been awarded over 51 billion KRW (about $44 million) in the last 7 years, with the number of cases filed by whistleblowers increasing each year.
Whistleblower attorneys at Kohn, Kohn & Colapinto hope that the success of the NTS programs continues. An English translation of the NTS Whistleblower programs can be found here.
Below is a short summary of the program.
Tax Evasion Informant Reward Program allows an individual with significant information on tax violations to privately and confidentially discloses their evidence to the NTS. If the evidence leads to successful enforcement resulting in monetary sanctions exceeding 50 million KRW (about $44,000), the informant could qualify for a financial reward of between 5% and 20% of the proceeds collected.
Foreign Financial Account Report Reward Program permits an individual to file confidential claims concerning the foreign financial account report violation. If an informant’s evidence was used to successfully prosecute a case resulting in monetary sanctions over 20 million KRW (about $18,000), he or she is entitled to a financial reward of 5% to 15% of collected proceeds obtained by the government.
Currently, the U.S. Foreign Corrupt Practices Act (FCPA), remains the most effective tool for international whistleblowers. From 2011-2018, 3,305 whistleblowers from 119 countries have filed claims under the FCPA whistleblower reward provision. Over $30 million has been paid to non-U.S. citizens who reported bribes paid overseas.
In the United States, whistleblower reward laws have been widely successful in recovering money for American taxpayers and providing monetary incentives to those who witness malfeasance and corruption. In 2018, the IRS Whistleblower Office reported over $1.4 billion collected from whistleblower cases while rewarding those whistleblowers with $312 million.
To further combat corruption, fraud, and waste, more countries should follow South Korea’s lead and pass legislation modeled on the highly effective U.S. whistleblower reward laws which protect whistleblowers and create incentives for them to come forward.