Whistleblower Disclosure Triggers “Global Tax Transparency”
In 2012, Bradley Birkenfeld received 104 million dollars for blowing the whistle on thousands of secret, illegal bank accounts at UBS bank in Switzerland. That award, the largest in history ever granted to an individual whistleblower, was awarded due to the unprecedented recoveries for the U.S. taxpayers, including a $780 million dollar fine issued to UBS for orchestrating the massive tax fraud. However, in a little-publicized speech, IRS Commission John Koskinen explained that the impact of Mr. Birkenfeld’s contributions reached much further than the 780 million dollar fine. Mr. Birkenfeld’s whistleblower disclosure was a pivotal “turning point” in the battle against tax evasion. In Commissioner Koskinen’s words, “The IRS’ serious efforts to combat offshore tax evasion, which had long been a problem, began in 2008 with our efforts to address specific situations brought to our attention in part by whistleblowers.” He referenced Mr. Birkenfeld’s disclosure and the agreement with UBS that followed, calling it “A turning point in our enforcement efforts.” He went on to say that “This agreement represented a major step toward global tax transparency and helped build a foundation for our future enforcement efforts.” The UBS case helped send a message throughout the world that tax evasion schemes could and would be uncovered by the IRS with the help of whistleblowers, and that these frauds would not go unpunished no matter where they were perpetrated.
Exactly how important was Brad Birkenfeld’s whistleblower disclosures to uncovering illegal offshore accounts? According to Commissioner Koskinen, “Since 2009, these programs have resulted in more than 43,000 voluntary disclosures from individuals who paid more than $6 billion in back taxes, interest, and penalties, and the numbers continue to rise.” These numbers included recoveries for back taxes; interest and penalties issued by the IRS but did not mention the FBAR and criminal penalties issued by the Department of Justice.
In March of 2013, the Government Accountability Office (GAO) studied the full effect of all the individuals who reported on their own tax fraud due to Mr. Birkenfeld’s whistleblowing and the resulting agreement between the IRS and UBS. The GAO report revealed that the mean total of recoveries for the U.S. government (including back taxes paid to the IRS and criminal penalties paid to the DOJ) was $433,840 (Page 13 of the report). That number, multiplied by the 43,000 voluntary disclosures cited by Commission Koskinen, brings the total amount of money recovered to approximately $19.5 billion dollars.
That’s right; approximately $19.5 billion dollars was recovered for the U.S. taxpayers as a result of Brad Birkenfeld’s whistleblower disclosure.
Mr. Birkenfeld’s courage in coming forward should be applauded, as should the IRS’s willingness to work with him. The IRS Whistleblower Office was set up the program to incentivize whistleblowers to come forward. Without that program in place, none of this could have been accomplished
